Embracing State Insurance Exchanges

With the feds and many states moving to create public exchanges under Obamacare, does that mean disaster for brokers who may find employers dropping their company plans and sending employees exchange-shopping for coverage?

Some brokers believe the solution is to compete head-to-head with the feds by creating their own exchanges, which is perfectly legal under the Affordable Care Act.

“There are consumers that need to be taken care of, and there are insurance carriers that will pay us to be able to provide the solutions to those consumers,” says Josh Hilgers, president of Health Partners America (HPA) in Birmingham, Ala. And, he says, because some brokers have decided to quit because of Obamacare, that means more opportunity for those who remain.

Hilgers cites projections of a market of 50 million to 150 million customers who will change the way they buy health insurance over the next three years. “That means we’ve got a golden opportunity to create significant revenue for our businesses,” he says.

“We expect the conversation about exchanges to heat up as part of benefit strategies for January 1, 2014,” predicts Mike Brewer, president of Lockton Benefit Group in Kansas City, Mo. “That’s definitely going to be part of the landscape.”

In fact, Brewer’s company plans to create individual company exchanges for large clients as well as private exchanges for individuals and small groups, a market he expects to expand. “We believe that, for a large group, an employer specific exchange makes the most sense, whether it is self-insured with multiple carriers or fully insured with a single carrier,” he explains.

But Brewer does not intend to miss the opportunity to serve individual customers as increasing numbers come to the marketplace, so he plans to construct exchanges to serve them as well.

Lockton Benefit Group is not alone in pursuing the private exchange strategy, says Joe Thomas, vice president of sales for bswift, a Chicago-based developer of exchanges, both public and private. “We are working with numerous CIAB members to help them create their own private exchanges that allow them to provide competitive solutions to what the public exchanges are going to be offering,” Thomas says.

Birmingham-based Northwestern Benefits of Alabama established a private exchange in partnership with Hilgers’ company.

“The big change will be that brokers and consultants will be marketing directly to the consumer rather than the employer,” Health Partners America’s CEO Scott Smith says. Brokers will have to educate employees on how to purchase insurance, whether they should buy it from an insurance company or a government or private exchange, and how the healthcare subsidies work. “It will be a complex purchasing decision, and brokers and consultants who build their services around that will be the big winners.”

Smith and Hilgers predict many companies, including those with more than 100 employees, will decide it makes financial sense to provide specified contributions for workers to purchase their own insurance. Some companies, such as Sears Holdings Corp. with 90,000 eligible full-time employees and Darden Restaurants with 45,000, are already using this concept but with group insurance as the underlying insurance product, Hilgers says.

Lookout Alliance, an individual health insurance brokerage in Reno, Nev., is establishing an exchange with HPA’s help to work with employers in Arizona and Nevada. “Employees can go there and get our expertise in the health arena, and we can help them get the health plan that’s best for them,” explains CEO Frank Welsh Sr. “At the same time, they can get information on all of our other insurance products from the same menu.”

Smith believes the movement to individual coverage will come in waves as provisions of the Affordable Care Act kick in.

Hilgers is convinced that private exchanges will be a new way to communicate directly with employees and give them options in both the group and individual markets that previously would have been a logistical nightmare.
“Group insurance isn’t going away; it will just be competing with individual policies,” Welsh says. “Employers will decide which approach makes the most sense for them and then make their decisions.”
Brokers have an opportunity to play a major role in helping clients sort through it all, and there is money to be made in the process, Smith says.

“We can guide employees as they make their healthcare decisions, offer supplemental products and design the best healthcare plan for their families.”

He predicts a large increase in high-deductible plans and in supplemental policies, such as those covering accidents, specific illnesses and long-term care.

“Brokers and consultants are going to have to get their heads out of the sand and rebuild their practices,” Smith says. “Those who embrace this change will survive. Those who don’t will get out of the business and go get another job.”