Preparing for Healthcare Reform – An Agent’s Perspective

Written by on November 30, 2012 in Law & Finance - No comments

With the elections over, we now have a very clear image of the future of health insurance in the U.S.. The intent of PPACA is clearly a good idea because there is a need for an initiative to help truly disadvantaged families and individuals struggling with chronic disease. Furthermore, the idea that by helping these Americans, the $49 billion in unpaid and unrecoverable costs that hospitals incur annually could be lowered by this same act. Unfortunately, along with the good intentions of this legislation come some major challenges. Some businesses for example will now be held responsible for providing and administering medical insurance plans for their employees. Additionally, these plans will be subject to increasingly intense governmental scrutiny. Considering these circumstances, the roles of health insurance brokers and agents will now be more important than ever.

With the pending changes, agents will need to reevaluate their business model and decide if they will fight harder to prosper in an increasingly difficult market or gradually lose their books of business to more qualified and pro-active agencies. We have already seen the commissions paid by health insurance carriers fall and are very aware that the same insurance companies will soon create on-line “pick-your-own” health plans for individuals which require very little help from a professional. Small employers will also have access to S.H.O.P. exchanges (Small-business Health Option Programs) and may decide that the additional fees to hire a licensed agent seem unnecessary or unaffordable. The most significant challenge that agents face will be maintaining large employers (over 50 full time equivalent employees) as clients because those organizations will be evaluating the cost per service provider ever more closely.

Owners and executives of 50-plus employee groups need to embrace the idea of a 3 year plan regarding the management of their benefits package and must now take a very subjective look at what their current agent is suggesting.  As any trusted advisor should, a benefits broker will need to present a complete understanding of how reform will impact each client’s unique business, as well as a specific strategy for achieving long term goals. The January 1st, 2014 deadline for implementation of health care reform is approaching quickly and the concept of picking major medical plans from a spreadsheet once a year is now an invalid solution. So what does all this mean to insurance agencies and the broker community?

First of all, we must make our clients aware of the reality of the new legislation. The reality for some businesses is that they are not even subject to the mandate, or that they already provide adequate and affordable coverage by the new governmental standards. These groups will only need guidance on how to gradually adapt to the requirements in the coming years and advise on how to “future-proof” their compliant status. Other groups who are not offering any health coverage or have non-compliant plans will need to hear the honest truth and prepare to make a significant change to the way they operate.

As agents, we must also be ready to offer businesses help in establishing wellness plans that result in lower utilization of, and dependence on, health insurance as a means of health care. After all, health care and medical insurance are two separate and different components of “reform”. Health care is effectively maintaining one’s physical wellbeing which includes doctor’s visits, prescriptions and major medical care for chronic disease, terminal illness and accidents. Health insurance on the other hand, is a viable way to cover the financial costs associated with that care. Employees and employers must be aware of the difference in the two and, at the same time, the direct correlation of both components. That means that significant investments must be made to educate employees, measure and track improvements in employees’ health, and help those with chronic diseases, weight management and unhealthy lifestyle issues. Ultimately, agents must be poised to handle these tasks for their clients and in turn use the results to actively fine tune their insurance purchases to be as cost effective as possible.

Agents who intend to remain in the health insurance and group benefits business will have to work harder, learn more, and re-invest a larger portion of their earnings in value added services in order to remain useful advisors for their clients. The complex role of compliance auditor, human resources support, wellness coordinator, and contract negotiator that agents play, has now become more complicated and is more crucial than ever. Business owners will have to rely more and more on their broker’s advice in the coming years and the consequences of poor recommendations could be financially catastrophic.

By Joe Gupton, CWCS, EmployeeSync Specialist, Jones Insurance

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