Health insurance 'Sherpa'? Agent or broker

Impact of new law

Since 2011, the federally mandated medical-loss ratio, or MLR, has required health insurance companies to spend 80 percent to 85 percent of premiums directly on health care. That has resulted in widespread commission cuts to agents and brokers, who fought without success to have their services valued as a health benefit.

"If you had a job and you found out that in two months your income was going to be cut by 50 percent, would that affect you?" Leavitt asks. "That's what happened with the MLR."

The advent of state health exchanges in 2014 also has some agents and brokers worried about their livelihoods.

But Tom Baker, a University of Pennsylvania law professor who heads a team that is studying health exchanges, says those fears may be premature.

"It's going to differ in different states," he predicts. "The Affordable Care Act allows states to have two separate exchanges, one for individuals and one for small businesses, and most states are going to do this. Most brokers aren't making a lot of money on the individual market now anyway, and I think they'll just walk away from it. But I think they're going to continue to play an important role in the small-business exchanges."

There's evidence for that in Massachusetts and Utah, the only two states to establish state health exchanges prior to health care reform.

Agents, brokers still find role to play

Brian Carroll, whose Carroll Enterprises Inc. has helped administer the Massachusetts exchange, points out that its plans are sold by brokers. "We pay lots of money in broker commission," he says.

Salt Lake City broker Ernie Sweat says he's adding small business clients specifically because he sells into the state exchange.

"For an agent, there's no reason to be afraid of the exchange," he says. "I'm putting one or two companies every month with the exchange."

Sweat says the exchange has "got its warts" but keeps getting better and is the right fit for some clients. "I ask those agents who say they'll have nothing to do with it, are you really providing your fiduciary duty to your people if there's a product that's perfect for them but you've decided not to sell it?"

Still, Anne Gauthier, senior program director for the National Academy for State Health Policy, which helps states set up their new exchanges, says health insurance brokers will have to adapt to survive.

"Initially, I think we will see most states use their agents and brokers as their partners to help get people into the exchange and purchase coverage," she says. "Depending on what functions the exchange does in terms of really helping consumers compare plans and assess their options electronically, I think that brokers and agents are going to need to prove their value in new ways."


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