ACA Update: America Needs Its Agents After All

The Affordable Care Act has been law for five years now and all signs indicate that the government is not doing a very good job selling insurance. Both online portals as well as salaried government workers are not cutting it. Executives at these exchanges are starting to realize that what worked in the past was not broken, and many of these exchanges are turning to the insurance agency system in hopes of saving the viability of these government exchanges.  That, in turn, has led to tremendous opportunities for agents who have been able to weather the changes and the recent years of uncertainty, say industry veterans.

State Exchanges Are Struggling

Some 36 states either opted out of setting up an exchange of their own or dropped the ball at some point and created a failed website, compelling the federal government to take up the slack. At least one exchange never made it out of the gate: Oregon somehow managed to spend nearly a third of a billion dollars on their CoverOregon website and exchange, and failed to successfully enroll a single soul. Ultimately, Oregon threw in the towel, hopped on the federal bandwagon (spending $248 million in federal money on top of the state spending).

Massachusetts, Nevada and Maryland’s exchanges are all in serious trouble with underperformance, despite the infusion of hundreds of millions of dollars of taxpayers’ money. These four states alone account for some $474 million spent – and it’s going to be a lot more by the time we’re done. Hawaii just announced its exchange will give up the ghost, despite over $200 million in expenditures to cover a population 1/10th the size of Los Angeles. The Colorado and Minnesota programs are in fiscal trouble as well.

America Needs Insurance Brokers

Even though the exchange websites themselves functioned much better during their second open enrollment period than the first, consumers still need substantial broker/agent assistance. As a result, government planners were forced to reach out to insurance agencies to get consumers the help and guidance they needed. If there was ever any idea that the exchanges could eliminate the agent, that theory didn’t survive contact with reality. According to the Kaiser Family Foundation’s 2015 Survey of Health Insurance Marketplace Assister Programs and Brokers, the vast majority (79 percent) said most or nearly all consumers needed assistance because they felt they lacked the knowledge to select and enroll in a health plan on their own; and 82 percent of brokers surveyed reported that nearly all consumers needed help grasping the choices available via their state exchange. Furthermore, a similar percentage reported needing help understanding even basic insurance terms and definitions.

The Agent is Back!

Meanwhile, states across the country are increasingly turning to licensed insurance agents to handle interfacing with the public. The agent is being returned to his or her traditional role of coaching and leading customers through their health insurance choices – and getting them to sign up.

The outlook is improving out in the field: According to the 2015 Aflac WorkForces Report (AWR), the percentage of brokers surveyed who report feeling confident about the future of their firms and their industry has now topped 50 percent, and has risen a solid 13 percentage points just in the past year. Furthermore, 4 brokers out of 10 now believe that the recent reforms in health care and insurance have created positive opportunities for their business. That’s still a minority, but it’s also a substantial increase over 2014 levels. The trends are moving in a positive direction for insurance brokers and, by extension, for independent insurance agencies.

Aflac characterizes the outlook for health insurance agents going forward thus: “Sunny with a strong chance of increased revenue.”


Working in agents’ favor:

Guaranteed issue has changed the ballgame in the Agent’s favor. As long as you can get the client enrolled during open enrollment, or catch them after they move to a new state, divorce, marry, lose a job, etc., you know you can get that individual or family enrolled. No more chasing down medical records, no more back and forth between the applicant and the underwriters, and no more having your applicant finally rejected for coverage – or rated up to the point of unaffordability – on account of their medical record and preexisting conditions. So instead of collecting commissions on around 70 percent of people you take an application on, you’ll get paid on nearly 100 percent. Onboarding time with business applications is also much faster.

Despite the name, the Affordable Care Act, premiums are higher than ever. So even though commission percentages are down, agencies have gained significantly on guaranteed issue, more business, greater efficiency and higher premiums. This is where the law works in the agents’ favor and, because of this, there is as much money to be made now as there was before the law came into effect.

The employer mandate is forcing employers to establish plans. Firms with 100 or more full-time equivalent employees (FTE) will need to insure at least 70% of their full-time workers by 2015 and 95% by 2016. Small businesses with 50-99 FTE will need to start insuring full-time workers by 2016. The mandate does not apply to employers with 49 or less FTE. Some companies who, in the past, only provided plans to some employees, will now be forced to provide coverage for their entire full-time work force.

Agents and brokers are also catching a break in the form of higher premiums. Yes, this makes things tough on consumers. But it also comes with commission increases, as well. So that’s a win for agents and agencies, right there – as long as it doesn’t provoke too many cancellations, of course. While some group plans have cut the percentage level of commissions in recent months, this decrease should be more than offset by pending increases in premium levels.

Agents also benefit strongly from massive investments in technology in recent years. In many cases, the agent no longer has to touch a pen to paper. Applications and enrollments are increasingly totally paperless. That saves an agency a ton in back-office man-hours, and it saves the agent a lot of running around, time at Kinko’s or in the office making copies, etc.

Individual and family market sales are up. The Kaiser Family Foundation reports that 60 percent of brokers say they are selling more non-group policies than they did in 2014. The time invested per individual sale seems to be up, and commissions are down slightly. But 6 out of 10 brokers report their overall incomes are about the same or better than they were in the previous year.

As a result, we’re seeing a marked uptick in health insurance agency valuations when they come up for sale, says Joe Totah, President of Risk Media Solutions LLC which owns “A few years ago, nobody knew what was going to happen, and there was a big uncertainty discount,” Totah says. “Today, there’s a lot less uncertainty, because now we know the agent isn’t going anywhere.

Looking at the broader picture, now is the time for the states to wean themselves from the state “Navigator” programs. While the first two or three open-enrollment processes required big federal investments in non-commission-based “Navigators” to help people work through the exchanges and understand their options, that money will soon be drying up. As these grants run out, most or substantially all of the population that relied on state navigator programs will need to rely on an agent or broker in future years. While it’s not likely that these Navigator programs will be discontinued entirely, budgetary constraints are likely to force these state-based marketplaces to pull in their horns, and reach out even more to agents and brokers to pick up the slack. And that’s where agencies can find lots of opportunities for easy, no-underwriting commissioned sales.

“I expect marketplaces to prioritize funding for alternative outreach programs that are capable of reaching a broader audience at a lower incremental cost,” writes Austin Bordelon, a practitioner with health care consultant firm Leavitt Partners established by former HHS Secretary Mike Leavitt. “This could include giving preference to dollars used for marketing and media ad-buys, or even system enhancements that encourage additional involvement from agents and brokers.”

Joseph Totah of Agency Equity agrees. “The door is wide open,” says Totah. “Increased efficiencies, faster turnaround time, and the ability to write more business with fewer or no declines means a large opportunity for sharp agents and agency principals. Running a health insurance agency is as profitable as ever.”