The possibility that many small employers may migrate to state medical insurance Exchanges as this feature of the PPACA (Patient Protection and Affordable Care Act) rolls out in 2014 has a lot of agents concerned about their future. I’ve been reading the comments posted by insurance professionals in various online forums, particularly the NAHU LinkedIn group. Their reactions range from panic to almost eager anticipation, depending on how ill- or well-prepared they are for the change.
Before I comment on some marketing strategies that might be appropriate in view of this and other developments related to PPACA, let me briefly summarize the main concerns:
- Each state has some discretion in determining certain aspects of the Exchanges, including whether group sizes will be 50 or 100 employees and if agents and brokers can be compensated for enrolling clients when they perform the role of Navigator, which was created by the Act to help consumers understand their health plan choices. Navigators are defined as entities entirely independent of the insurance issuer.
- Whether employers would really be better off dropping coverage and paying penalties is controversial. Despite one study (McKinsey) that seemed to say more than half of employers will “dump” their health care coverage and pay the penalty, several other studies suggest few employers would take this option. (McKinsey has since backtracked, saying that its study only gathered opinions and was not, like other less dramatic studies, predictive).
There are several reasons to be skeptical of a mass exodus to Exchanges:
- Many people think dumping employee health coverage is not a good tactic, even in a high unemployment economy because morale would suffer and valuable employees may actually leave for jobs elsewhere.
- It’s unlikely employers would be motivated to switch to an Exchange simply for economic reasons, since by law plans in and out of the Exchanges must charge comparable rates.
- Since the rates in the Exchanges must be comparable to those in the private market, it is likely insurance companies will make the effort to be competitive and hold on to their business.
- Many brokers fear that the paperwork involved in dealing with an Exchange will be burdensome, much like the detail required to apply for a mortgage, so that compensation for the work involved, even if a state Exchange says the agent or broker is entitled to compensation, is an issue.
- Agents new to the business are concerned about building a book only to have it undermined if the states they do business in lock them out by not allowing compensation for brokering groups into Exchanges. Some talk about selling Medicare and life insurance until they can find another job, or even finding a job on the property/casualty side of the business.
- Probably the most important consideration to keep in mind at this point is that either the Supreme Court or the 2012 elections may ultimately mean the undoing of the PPACA. The 11th Circuit Court of Appeals has just ruled that it is unconstitutional to require all Americans to buy insurance or pay a penalty. These and similar cases ensure the issue will be decided by the Supreme Court, maybe as soon as next spring.
In my next post, I’ll discuss some ways agents and brokers are thinking about adjusting their marketing strategies to deal with and even improve their odds for success in this environment. To read it now, just click here.