Of course, in these early stages, no one can predict with 100 percent certainty what will eventually "fall out" from health care reform. But limitations being understood, we still asked benefits experts what they see for the future -- for health care reform in general, for employer reaction to it and to voluntary benefits, and the implications for brokers and agents.
Fred Hunt, president, Society of Professional Benefit Administrators (Chevy Chase, Md.):
Hunt says it's difficult to know for sure what all of the implications will be of health care reform. "Even the people who are writing the regulations are saying that they don't know yet." One concern is whether doctors will go along with the changes. "A lot of them are near retirement age, and apparently a number of these are planning to retire early," he notes. "Others are planning to open cash-only boutique practices."
Hunt says he would also not be surprised if a lot of health insurance companies say, "Thanks, but no thanks," and back out of the U.S. market altogether. "There is a long history of insurance companies backing out of individual states, even some big states," he points out. "In addition, a lot of insurance companies see burgeoning markets in Europe and Asia, so they may focus their business there."
Some others may transform themselves from insurance companies to third party administrators. "In this way, they could do self-funded plans," he says.
There may also be changes in the workplace. "A lot of employers may want to reduce their workforce to 49 employees, since 50 is the trigger for a lot of requirements," states Hunt. To make up for the shortfall, they may focus on independent contractors, leased employees, and related options. "Even a 250-employee trucking company might tell all of its employees that they have to become independent owner-operators," he adds.
Other employers may offer just the bare minimum of coverage that is required by the government. However, for executives and other key employees, they may increase their salaries to allow them to get some more "bells and whistles." Sadly, "this may mean that the average worker will get less."
In terms of the implications of all of these changes for brokers and agents, Hunt believes it's too early to tell. However, if things move to the lowest common denominator (as delineated above), then it will become more difficult for brokers and agents. "Employers may not want to officially sponsor anything than what is required," he notes.
Regardless of what happens, Hunt believes that the best strategy for brokers and agents going forward will be to focus on human nature, rather than legislation. "I think the future will be driven by human nature, which is how people respond to the legislation, rather than the legislation itself."
Lance Shnider, president, VBA and Mini-Med Health Plans (Columbus, Ohio)
As far as Shnider sees it, one of the good things about health care reform is that it shouldn't have much of an impact on voluntary benefits. "The voluntary market has always tended to be unscathed by any legislation changes that have occurred during the 16 years I have been in the business," he explains.
Additional good news, both short-term and long-term, is that all of the changes being discussed and legislated apply strictly to traditional, fully-insured health care. "For example, nothing is really going to affect disability, life, accident, or supplemental hospital indemnity plans at all," Shnider says. "This market should really remain unchanged. In fact, and I can't explain why, we are having a huge upswing in sales on those right now."
Certainly, though, he admits he does see some impact on limited medical plans. Is there a risk that employers would drop voluntary benefit plans if they are required to focus on traditional health care? Shnider sees two scenarios, but neither of them bode poorly for voluntary benefits: Employers who already offer health insurance are going to start to get tax breaks this year, which represent about 35 percent of premiums. And, he adds, even with the changes that are set to take place in 2014, there should be no negative impact to employers that are already offering coverage. Furthermore, since voluntary benefit products are typically 100 percent employee-paid, he doesn't see any impact on those.
Then there are the employers who don't offer health insurance and will be required to. "The reason they don't offer it currently is because they can't afford it, not because they don't care." And, Shnider adds, it is unlikely that most of these will begin offering it, even when it is required, because the tax penalties for not offering are a fraction of what insurance premiums would be if they did.
"I think that brokers who sell traditional health are really going to get hit," he continues. "If insurance companies have to waive pre-existing condition limitations, no longer rate females higher than males, and have no lifetime caps on benefits, premiums have to increase, and this is going to make coverage much more difficult to sell."
In addition, just as most people use online exchanges for booking travel these days and no longer using travel agents, more and more people will begin using the new exchanges for buying insurance, and fewer of them will use brokers.
"As such, I encourage brokers to diversify and begin to sell more voluntary, so they will be able to absorb the 'hit' when all of the health insurance changes begin taking place," Shnider says. "You need to have a good product mix so that, whatever the changes are, you can recover."
Dan Robinson, president, Advanced Voluntary Concepts (White Plains, N.Y.)
"As different sources are summarizing the health care reform platform and the various stages at which these changes are going to become effective, it is still a little early to understand the true impact to the broker/consulting community and their clients related to voluntary benefits," cautions Robinson.
However, he believes the voluntary benefits market in general, and specifically in the Northeast, tends to be an immature market.
"It was already going through significant challenges with medical products prior to the health care reform bill," he explains. "As such, I don't believe that these immediate and future changes will diminish the growth of this segment. In fact, I think it will enhance it."
That is, based on the work he has done around the country with brokers/consultants, voluntary benefit discussion and delivery is still in its infancy stage in a lot of areas. "In fact, most of the delivery we have seen brokers and consultants bring out in terms of voluntary tends to be more reactionary," he points out. However, because of health care reform, Robinson believes that by 2013 and 2014 these changes will require brokers to change their approach and become much more proactive.
He suggests that some brokers/consultants may need to reformulate their attitudes and preconceived notions related to the inherent value of voluntary health products. "Most voluntary health products will begin to take a very large role in satisfying some of the greatest challenges that clients will face down the line, specific to some of the health care reform changes that will take place in 2013 and 2014," he states. For example, one of the greatest employer challenges today that will continue to intensify in the future is the ability to keep employee medical benefits intact and strong, while making the necessary changes in order to be compliant without the financial penalties. Brokers/consultants, he believes, can play an instrumental role in helping guide employers through this.
"I have been saying that to my broker/consultant clients for over 10 years, and health care reform will only support what I have been saying: There is a sense of urgency," he emphasizes. "Don't wait. Change has been coming for awhile, and, in the future, it will be more aggressive than it has ever been. You either have to be prepared, or it will come back to hurt you and your clients in the future."
John Kirke, senior consultant, IMA of Colorado (Denver)
"In broad terms, I am very bullish on benefits in the future," Kirke says. "Voluntary benefits are already a $5 billion business that is growing at 4 percent to 5 percent a year, and I believe that health care reform will drive further interest into voluntary benefits."
One reason is that health care reform will bring more employees and their dependents to the table for coverage. This will lead to a broader awareness and knowledge of the value of voluntary benefits.
"If an employee has never purchased health insurance in the workplace, that employee would never be aware of the other options that can also exist, such as short-term disability, life, or critical illness insurance," he suggests. "As such, as employees become more familiar with health coverage, they will also have more access to information on voluntary benefits."
However, will employers who currently don't offer health coverage simply accept the tax penalties rather than offer coverage, since the latter will be less expensive? Kirke says no. "I don't believe you can be a competitive employer these days and not offer a benefits package," he replies. "In addition, I just read a study from the Bureau of Labor Statistics, which estimates a shortfall of about 2.4 million workers by 2014, due to Baby Boomers leaving the job market." As such, employers will have to compete more for workers. "Offering benefits will continue to be a leverage point."