Obamacare has insurance brokers excited and wary for future

By Dan Goldberg/The Star-Ledger
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on October 13, 2013

When the new health insurance exchanges opened on the first of the month, Obama administration officials hailed it as “a historic day” when millions of Americans would have new access to affordable health insurance for themselves, their families and their small businesses.

David Oscar, an insurance broker in Montclair and a past president of the New Jersey Association of Health Underwriters, said insurance brokers he knew had a different name for Oct. 1.

“We called it ‘Dante’s Inferno,’ ” he said. “It was the seven levels of hell.”

The phones were flooded with uncertain clients wondering what all these changes meant. There was a lot of misinformation and misunderstanding, Oscar said.

There are more than 96,000 brokers in the state licensed to sell accident, health and sickness insurance, according to the state Department of Banking and Insurance.

Insurance brokers throughout the state expect all the new rules and regulations, the
changes in benefits and tax credits could be a boon for business. At the same time, they are wary of the tectonic shift the industry is undergoing, which is sure to transform how brokers interact with clients and the health insurance companies upon which they rely for commissions.

“There are two schools of thought,” said Matthew Roy, the immediate past president of the New Jersey Association of Health Underwriters and president of Blue Ocean Benefits and Consulting in Red Bank. “This could put brokers out of business, but on the other hand there is a lot of opportunity for brokers in that the ones taking it seriously, learning the ins and outs of it, being serious about their craft, they can become a resource for people. ”

The goal of the Affordable Care Act, known as Obamacare, is to provide millions access to affordable health insurance. That could mean a plethora of new customers for brokers, according to Dave Mordo, vice president of education and compliance with Walsh Benefits in Fair Haven.

“Opportunities for the broker will increase tenfold under Obamacare,” he said.

But not everyone is so sanguine.

President Obama is fond of saying that purchasing health insurance from the government’s website will be as easy as buying an airline ticket from Kayak.
That may be good for the consumer. But insurance brokers are wary. (There has been a 50 percent drop in the number of travel agents since 2000, according to the U.S. Bureau of Labor Statistics, in part due to the ease of purchasing tickets online.)

“I expect to lose about 30 percent of my business in the first year,” Oscar said. “I’ve got clients who are going to go online. Once they can go online, of course they are going to drop me.”

That has the potential to cripple the industry but Oscar said he expects many of his clients to return after a couple years because the Affordable Care Act makes purchasing insurance more than just about finding a plan that covers what you need at a price you can afford. There are dozens of provisions in the law that can affect which plan is really best.

There are tax implications that could affect what kind of federal subsidy an individual or family receives. And it becomes exponentially more complicated for those purchasing insurance for a small business.

More than anything else, these new complexities are giving brokers hope that Obamacare might, in fact, make them more necessary than ever.

“A small employer, with fewer than 10 employees, guess who their HR guy is,” Oscar said. “I am.”

Brokers argue picking a plan is only the beginning of the service they offer.
They are, they say, a guide to the health insurance labyrinth, which can ensnare a novice.

Aside from answering questions about who employees must cover to avoid penalties under the new law and which companies might be eligible for tax credits, they can help choosing a plan that covers speech therapy or durable medical equipment or one that has generous maternity benefits.

“Enrollment is a really small piece of the puzzle,” Roy said. “It’s not just picking a plan, it’s why wasn’t my MRI approved. We navigate that maze for them.”

The Affordable Care Act, brokers say, may help people afford health insurance but it can’t really help them use it.

“Brokers are still the ultimate consumer advocate for insurance purposes,” Mordo said. “The navigators are lovely and cute and they got federal money, but when it comes to absolute consumer advocacy and knowledge about health insurance the broker is the only answer to people’s question.”

The business is also threatened from a provision in the Affordable Care Act that says insurance companies must spend at least 80 cents of every dollar on health care in the individual and small group market. That has many worried that broker commissions are on the chopping block.

A 2011 report from the U.S. Government Accountability Office found that “almost all insurers were reducing brokers’ commissions” because of the new law.

The National Association of Health Underwriters is lobbying for a bill, which has bipartisan support in Congress including from New Jersey Reps. Leonard Lance (R-7th Dist.) and Rob Andrews (D-1st Dist.), that would exempt commissions from the 80/20 rule. But that bill is languishing in committee.

“Brokers are scared,” said David Glasker, a Westfield insurance broker. “Whether it is justified or not remains to be seen.”

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