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Small Business Employee Benefits and HR Blog

Health Insurance Brokers Ready for ACA, Adapting Business Plans to Succeed

The Affordable Care Act (ACA) presents opportunities and uncertainties to health insurance agents and brokers. What do health insurance producers predict for health insurance and their business in 2014? 

The 2013 annual broker survey conducted by Oliver Wyman and Benefits Selling magazine found that brokers are more ready for the ACA than in 2012. Brokers are evaluating the risks of the ACA and assessing how to sustain their business post-ACA. In response to decreasing commission structures, brokers are making hard decisions about the direction of their business, including what products to sell and what services they'll offer. Here's a look at what the survey found.

Brokers Accepting, and Ready for the ACA

According to the survey, more brokers are accepting the ACA -- but this wasn't the case in 2012 when brokers were skeptical about whether the ACA would ever be implemented. The 2013 survey suggests that brokers are now accepting the ACA, and moving forward.

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New Threats to Current Health Insurance Market

Of those surveyed, nearly three quarters believe that the new public health insurance exchanges are a moderate or large threat to their business. Other threats include private exchanges (group and individually-based) and direct to consumer models.

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Commissions Expected to Decline, Business Models to Shift

Of the brokers surveyed, 54% expect to see declining commissions in 2014, as compared to 40% in 2012. Nearly one in ten brokers surveyed expect the decline to be greater than 50% in 2014.

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As a result of the declining commissions, brokers are shifting revenue models. As shown in the chart below, brokers are expecting to receive more compensation from consultative fees in 2014 (15% of compensation in 2014, as compared to 7% in 2012).

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Adapting Business Models for 2014

According to the survey, in response to decreasing commission structures, brokers are making hard decisions about the direction of their business.

One of the challenges brokers are facing is helping clients deal with premium cost increases. According to the survey, brokers are most likely to recommend their client buys down benefits to reduce costs (30%), maintains benefits at potentially higher costs (20%), maintains price and benefit with limited network (10%), and implements a private exchange/defined contribution (DC) platform (10%).

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When asked about their focus on writing health insurance post-reform, 46% said they would have less focus on health insurance as their core offering, 17% said a greater focus, and 36% said their focus on health insurance as a core offering would not change in 2014.

Survey and chart source: Oliver Wyman and Benefits Selling

If you're a health insurance producer, how are you adapting your business model for 2014? Leave a comment below.

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