Matt Glaros,vice president of sales and operations for Dyer, Ind.-based benefits consulting firm, Employer Benefits Systems, joked that before the Affordable Care Act (ACA), “you could train a chimp to do what I did.”
Glaros said the business was service and rate-based.
“It was not complicated,” he recalled. “You negotiated the best rates with insurance companies and serviced your clients.”
Then the ACA passed.
“Everyone thought the market would fall apart and the sky would fall. But we took the opposite view. We saw this as a huge opportunity to pick up a lot of new business.”
Glaros, a broker for seven years, is emblematic of most healthcare insurance agents whose jobs, income and business models were dramatically impacted by the landmark 2010 law. More than 60% of small businesses rely upon insurance brokers to obtain health insurance.
Industry experts said the law has driven industry consolidation, changed revenue streams and expanded the role that health insurance agents and brokers play in the market.
While customer service and finding the best rates remain important, Glaros said his small business’s future is now built upon healthcare reform expertise and knowledge.
“You have to make sure business owners understand their options and risks, otherwise they could be on the hook for a lot of money,” he said. “We chose to become the local experts and for us, it’s paid off tenfold. We’ve picked up a lot of small group health plan and individual business. Between 2012 and 2013 we our profits are up 30%.”
While Glaros said the firm has benefited financially, he conceded it has been difficult and fraught with uncertainty.
“Many people are very worried,” he said. “Employers call every week saying they want to drop their health plan and we talk them off the edge and explain why they shouldn’t.”
Kelly Fristoe, a regional vice president of the 100,000 member National Association of Health Underwriters (NAHU), which represents 100,000 health insurance brokers, agents and employee benefits consultants, said brokers have left the industry.
“Most decided they did not want to relearn the business. We’ve had to go back to school to learn the processes of helping customers enroll through health insurance marketplace. It’s true that our business has become more seasonal due to the open enrollment and the deadlines it imposes. Agents who didn’t want to succumb to being really busy in the fourth quarter have shifted gears to get out of healthcare and switched over to property and casualty, life and other insurance products or retired. The law has changed the dynamics of how we do business. Agents who are willing to buckle down and work really hard like they did early in their careers will be successful in making the transition into this new era of consumers purchasing health insurance.”
Fristoe, owner of Financial Partners of Wichita Falls, Tex., said brokers have become one of the most important parts of the healthcare system.
New Role as Educators
“There is so much anxiety that exists, especially during the open enrollment process as the deadline approaches. People are still confused and are reaching out to brokers more now than ever in the past. Those of us rooted in the healthcare marketplace are finding ourselves incredibly busy.”
He said agents who can educate their clients can survive in this market.
“There is so much business out there. Consumers are flocking to us,” said Fristoe, who cited a 45% revenue increase between October 2013 and March 2014 and a 25% bump in profits.
“As long as it’s complicated, I’ll have a job. In every market there are winners and losers,” he said. “Winners find solutions that dwarf the problem. We capitalize on opportunity.”
NAHU Legislative Chair Ken Statz, a Cleveland, Ohio-based broker for 40 years, said insurance companies have cut sales commissions to brokers and have tiered agencies, generally favoring with sales bonuses larger firms over smaller ones. He said many brokers are diversifying their insurance portfolios, broadening their product lines beyond health.He said the law has spurred unintended consequences that adversely affect brokers and have driven industry consolidation.
“We’re seeing agency mergers and acquisitions as smaller firms recognize the need for further resources and expertise in understanding these regulations and their impact on clients and brokers,” he said.
Broker Liz Gallops was a willing casualty of the industry’s tectonic changes. Gallops literally left a mom and pop agency (her parents’) after they sold the family firm to the regional brokerage, Allegacy Insurance Solutions of Raleigh, N.C., where she is now employed.
“We joined a larger firm after the ACA was passed so we could access additional resources that we couldn’t afford on our own,” she said. “We saw this coming.”
Since the law’s passage, she said she’s now focusing exclusively on serving individuals seeking policies.
“It’s been great for me because I’m bringing in a huge pool of new potential clients that we didn’t have before,” she observed. “Every day is turning out to be a surprise, with new clientele, new challenges of navigating new regulations and a constantly shifting landscape.”
Medford, Ore., broker Damian Jackson ofthe Oregon Health Exchange said his state’s transition to health reform has been chaotic. Oregon initially decided to form its own state-sponsored health exchange. But, like the federal website, its technology rollout was a fiasco that included delays, switches to manual, paper enrollment and evolving rules and regulations.
The Cover Oregon exchange ultimately failed and the state opted to allow the federal government to operate its health insurance marketplace.
“It was mass confusion,” Jackson said. “But in the end, it served as a call to action that brought a sense of urgency and we picked up 400 to 500 new applicants and a lot of individual, rather than small group business.”
Jackson said one downside hampering brokers in his state and elsewhere is the delay in commission payments for new business they wrote.
“In some cases insurers and the state and feds are behind by six months in paying commissions.
They are catching up and it is getting ironed out. But it is a cumbersome process.”
Jackson said that his region of Southern Oregon has few large employers and to sign up new business he often travel for hours in three directions to service small firms and individuals. He said many employers can’t afford to subsidize small group health plans, known as “true group” coverage. But they do offer insurance that employers sponsor, but employees actually pay for themselves, known in the industry as “voluntary benefits.”
“If employees want it, they can choose to pay it. If they choose to pay, then the employer deducts premiums from their paychecks and they don’t get billed individually,” he explained. “This insurance model is big in our area.”
San Diego broker Craig Gussin ofAuerbach & Gussin, said if he would have known a year ago what he knows now, he would have hired more people.
“The workload is way beyond what we expected. We normally write about 100 health applications a year and in the first six months of this year we’re already up to 350.”
In addition to the delays in commission payments, his firm has needed to hire someone to be sure that it receives credit as agent for business it wrote so it is fairly compensated.
“We’re still figuring out whether we’re making more money,” Gussin admitted. “I’m hoping this all will pay off, but I don’t know where the future lies. We’re all trying to figure out which way this ship is sailing because nobody has a compass.”
David Mordo, vice president of education and compliance for Walsh Benefits in Fair Haven, N.J., said brokers were told the ACA would spur great competition and offer more plan choices.
“We were told there would be many more options as far as health plans and designs, but that never came to fruition. There has been virtually no increase in competition. That was a big disappointment,” Mordo said.
However, he said doom and gloom predictions have not materialized.
“We have not seen employers dumping coverage or a mass exodus from the New Jersey market,” he said. “Employers are still providing benefits as best they can for their employees.”
He said well-positioned brokers with diversified portfolios are still doing well.
Erin Clampett, a broker with national brokerage Marsh & McLennan’s Fort Lauderdale, Fla., office, said the introduction of the ACA has been a positive development.
“It’s empowered consultants to reach above and beyond the typical area of our expertise,” Clampett said. “Now we really focus attention on what our clients hope to achieve and how to measure the success of their employee benefits program. In this business, you can no longer afford to be a generalist.”