The passage of health care reform at the federal level has people wondering how this will change the way we do business. Since much of the Patient Protection and Affordable Care Act is modeled after reforms enacted here in Massachusetts in 2007, the Bay State can probably serve as an early indicator of where we're headed nationally. So as a practical matter, what does our three-year experience with reform tell us so far?
First, the legislation will do very little at the beginning to reign in costs because the underlying causes remain. Chief among these are the contractual obligations insurers have to providers, which lock in multi-year increases. Here in Massachusetts, there was almost no attempt at cost control in the initial reform -- it was assumed this would happen after everyone was covered. The welcome pay-for-performance reforms established for Medicare will do little to help us near-term.
Second, it's worth noting that the federal law did not nationalize health care delivery. Likewise, Massachusetts did not abolish private health insurance plans. Expansion of coverage was accomplished in two ways: 1) by expanding Medicaid via our "MassHealth" program; and 2) through private health insurance coverage via an individual mandate and subsidies for lower income participants. Most of the former were never going to purchase coverage to begin with, but there will be new opportunities as the currently uninsured look for coverage. Separately, as our insurance exchange or "Connector" was created, private intermediaries were either hired or purchased to provide insurance products. Given the alternative of a state-run bureaucracy, this was a compromise we could live with.
Next, the proliferation of regulations, plan design restrictions and minimum coverage guidelines has resulted in fewer alternatives. This has accelerated the commoditization of the remaining plans. Brokers and consultants are going to have an even harder time differentiating themselves. Meanwhile, small group producers especially should expect to see commissions squeezed further. Be prepared for fixed, per-head compensation schemes. Paradoxically, while we prepare to do more with less, the scapegoat of commissions will look more ridiculous as time goes by. To coin a phrase, "It's the health care costs, stupid" -- not agent compensation or insurer greed -- that's the problem.
Finally, the forces at work in the larger economy will continue to affect our business simultaneously with the reforms. Vendor consolidation, commoditized products, the acceleration of technology, and companies and governments doing more work with fewer people will put additional strain on your agency's resources.
As clients and prospects come to grips with the practical effects of these reforms, expect the amount and complexity of the questions you're dealing with to explode. Smart advisors would do well to beware of "window shoppers" looking for free advice. The good news is we're still in business. They haven't made the sale of health insurance illegal -- yet. But those of you in the other 49 states should be prepared for fewer options, less help, lower compensation and greater demands on your time.
Health insurance sales can still be an important part of your practice. But the need to diversify your income stream, whether through retirement plan sales, voluntary benefits, disability income protection or other administrative services couldn't be clearer.
