Benefits brokers fear impact of health insurance exchanges

If Congress implements a new system of health insurance exchanges across the country, Indianapolis benefits broker Joe
Guzman is confident he and his peers would take a hit.

And he gets round nods of agreement from the nearly 30,000
insurance brokers and agents licensed around the state.

Brokers, while independent of insurance companies, receive
a commission from an insurer each time they bring an employer or individual to buy that insurer’s product. They pitch
themselves to employers as advisers who can help interpret complex insurance contracts, help employers improve their workers’
health, and shop for deals.

But the health insurance exchanges would set up a new marketplace where individuals
and small employers could buy directly from health insurers. According to bills and proposals in Congress, the exchanges would
standardize and make clear the costs and benefits offered by each insurer selling through the exchange.

And that
might eliminate the need for brokers and agents—at least for individuals and employers with fewer than 50 people on
their health plans.

That’s what Guzman expects. For his firm, Indianapolis-based Benefit Strategies Inc.,
those two groups make up about 60 percent of the business.

Fluegel

“I don’t see us having nearly
the presence, nearly the reach, that we do today,” Guzman said about benefits brokers.

Others agreed. And privately, several brokers said they expect some of their
peers to go out of business if the health insurance exchanges come to fruition.

“It’s kind of scary,” said Sheri Alexander, senior vice president of employee benefits
at Indianapolis insurance brokerage Gregory & Appel.

House Resolution 3200 calls for one national
insurance exchange, but would allow states or groups of states to form their own exchanges if they wanted. Also, a Senate
proposal released this month by Sen. Max Baucus, D-Montana, would create a series of state-level insurance exchanges.

Both proposals would use the Internet to allow customers to compare and purchase health insurance
policies.

Health insurers, such as Indianapolis-based WellPoint Inc., would prefer Baucus’ approach. They
fear that a national exchange is more likely to also include a new layer of regulation and administrative
hurdles—in addition to the state-level insurance regulation that would continue to exist after
the exchanges began.

“It potentially adds costs to the system, because there is an
additional layer of administration,” said Brad Fluegel, WellPoint’s chief strategy officer.

Fluegel said WellPoint wants brokers to have a role in the exchange, but said it depends on Congress’
final bill.

Alexander believes commissions for brokers would continue for at least a few years—as long
as employers still have the option to get insurance outside the exchange.

“If the exchange is only an option,
then there will still be a role to guide,” she said. She drew a parallel with the trends in stock investing, where online
technology has allowed investors to make their own trades for a decade, yet most still work with brokers to guide them through
the complexities of stock picking.

Still, benefits brokers worry that if Congress also offers through the exchanges
the controversial “public option”—a new government-run insurance plan for working adults—all small-group
employers would rush into the exchange.

Looking ahead to that possibility, many local brokers are taking actions
now.

Within the last year, a dozen Indiana brokerages have decided to sell or merge their
businesses into larger firms. The specter of health reform was a major factor for several of them.

But many
other brokers are looking to diversify their businesses. That’s what Guzman is doing.

He’s eyeing
a new division that would broker sales of property-and-casualty insurance. Also, he said, Benefit Strategies would have to
work with larger clients, and try to broker more long-term care, dental and vision policies.

That kind of diversification
is the only way brokers will survive, Alexander said.

“They’ll either expand their offerings or continue
the recent trend, which is sell their book,” she said.•