Brokers: It's A Whole New Ballgame

Learning to Thrive in a Post-Reform Industry

The Patient Protection and Affordable Care Act (PPACA) is in many ways a significant step towards a more equitable health insurance system. By providing health insurance to the 50.7 million currently uninsured Americans and assuring coverage for children with preexisting conditions, health reform is prepared to make a lot of positive changes.

However, there are many concerns in the insurance industry about the effect that health reform might have on the everyday operations of the insurance market and those that make their living selling insurance.

The Downside

Under the PPACA, beginning in January 2011, plans sold to individuals and small groups must have a medical loss ratio, the amount spent on actual medical care, equal to 80 percent of premiums. Plans that spend less on medical care will be required to send rebates to their customers.

Broker commissions, which can make up to 5 percent to 20 percent of premiums, are counted in the administrative category and cannot be included in the 80 percent required to be spent on medical care.  According to most experts, broker compensation will, by necessity, be the first expense cut as insurers scale back administrative costs to comply with the minimum medical loss ratio.

Brokers are also worried about the future for another reason: a vital part of their current role, sales and marketing, could be made redundant due to the new state insurance exchanges that will go live by 2014.  Individuals and small groups will be encouraged to utilize these Web-accessible marketplaces to purchase insurance.  In addition to listing plans available by location, the exchanges will post quality and price information and administer federal subsidies for those who qualify, theoretically making it easier for individuals and small business owners to compare plans and choose the options that best suit their needs.

While much of the legislation is jarring to the insurance brokers' business, there is still a way to be successful post reform.

It is Not All Bad News

The individual market is growing faster than any other segment of the health insurance industry.  In fact, a study conducted by Forrester found that the number of individual insurance purchasers has hit 15 percent, and one-fifth of those individual purchasers indicate that they are likely to switch health insurance providers in 2011.

Choosing an insurance plan is a difficult and important decision.  According to a recent report by Consumer Union, consumers find purchasing insurance to be overwhelming, confusing, and sometimes intimidating.  That aspect of health insurance is not going to change.  As demonstrated in a 2007 IBM study, individuals prefer working with a broker to assist with health insurance shopping and enrollment.

The advice and counseling that state-licensed brokers provide will still be needed.  Brokers who embrace a true advisory role, not just a customer service role, will find themselves regarded as an asset and a necessity in navigating the insurance marketplace.

A broker’s knowledge of the industry is their best asset in surviving health reform.  But in order to thrive in this new setting, brokers need to fully embrace one thing – technology.

Thrive Not Just Survive

Technology is the key to success in the post-reform insurance market.  By using technology as a partner, brokers will be able to capitalize on efficiency, marketing, and positioning themselves as a trusted educator.

The use of technology in today's consumer world is booming.  People do their research and their purchasing online in all marketplaces including health insurance.  With the advent of state exchanges, the Internet will play an even larger role in health insurance.  Logic tells us to go where the customers are, and in this case, it is online.

By utilizing technology, brokers can become a resource to the ever-growing numbers of insurance consumers online.

Efficiency is extremely important.  Without the use of technology, quoting insurance for individuals is a time-intensive and tedious process.  Quoting the same product on multiple carrier sites increases a broker's costs.  Brokers can turn around quotes for individuals at a profitable pace by using technology that can quote multiple carriers quickly and clearly.

In addition, underwriting intelligence can shorten the sales cycle time and minimize administrative costs for brokers.

Sales technology provides brokers with one less hurdle than they previously encountered – geography.  As long as brokers are licensed in other states, they are free to work with customers in other states.  Prior to an online presence and online enrollment, brokers were hampered by traveling distances to their clients.  With technology, geography is no longer an issue which increases an agent's potential client base.

The right technology also presents brokers with options for cross-selling opportunities with ancillary products within the same quoting system. There are alternate avenues in the insurance market other than health insurance.  Health reform only governs medical insurance, so it would be advantageous to look towards ancillary products to increase potential sales opportunities.

Consumers like to purchase products from a trusted source.  By positioning themselves as knowledgeable advisors in all insurance fields, brokers will be able to capitalize on cross and up-selling opportunities such as providing quotes for health, life and automobile insurance, among others, all in one place.  And, those ancillary products might prove to be more profitable in the end.

Conclusion

The true impact of health reform on the insurance broker is unknown.

Opportunities for success exist for brokers who can position themselves as knowledgeable insurance advisors to the masses of Americans that will be looking for individual insurance for the first time.

Technology is a broker’s best asset in marketing to new clients, managing leads, and servicing their customer’s needs.  

Brokers need a way to manage business today while facing reduced commissions, and technology gives them the edge they need.

About Connecture

Connecture is solely focused on delivering integrated Web-based sales, service and process automation solutions to the health insurance industry. We have products and services that are tailored to serve the perspective and interests of every player, and so our own perspective spans them all. We truly see the big picture, which helps us deliver best-in-class technology in every market we serve.

It’s a perspective of depth as well as breadth. The health insurance world has been our sole focus for more than a decade, and in that time, we’ve developed a deep understanding of all aspects of insurance distribution. We track regulatory shifts, adjust our technologies to ensure compliance, and consult our customers through the changes. This helps us to see around corners for our current clients, and find new ways to help tomorrow’s customers in evolving markets. All of this is supported by a proven track record of large-scale, on-time, within-budget implementations. Our solutions have proven to deliver increased sales, enhanced broker loyalty, improved back-office efficiencies, lower customer acquisition costs, and decrease overall operating expenses.

For more information, call Meg Riddle at 262.408.3865 or visit the Connecture website at www.connecture.com

About the Author:

Bob Barry began working in the insurance technology industry in 1998 at a company that became Workscape and later Riverwood Solutions, which eventually merged with Connecture.  In total he has 28 years of experience in the health and life insurance industry, which gives him a great insight into the challenges health plans face, particularly in automating their new business and renewal processes as well as reaching out to brokers, prospects, and members to complete business online.