Insurance Brokers Threatened By Health Care Reform

July 10----Small-business brokers fear insurance exchanges could leave them out in the cold.

Health insurance agents that help small businesses shop for coverage say some provisions of the health care reform act threaten their livelihoods.

Brokers' commissions have been trimmed as a result of the law's limits on insurers' administrative costs, and they fear that they will be left out of the loop in the state insurance exchanges the law creates, which are supposed to be up and running in 2014 to provide coverage for more people. The law was upheld as constitutional by the U.S. Supreme Court on June 28.

Governor Christie recently vetoed a bill to create an exchange, and it is unclear if the state will establish one or cede the task to the federal government.

Brokers, who opposed the vetoed bill that gave them no representation on its governing board, do not know how an exchange in New Jersey will work or how it will be managed. They worry that that they will be given little or no role in the sales process, and that tax credits and subsidies will result in a large migration of customers to the exchanges.

The government requires that exchanges be consumer-friendly, with easy-to-decipher policies and comparisons, perhaps making brokers' services less necessary.

"In New Jersey we don't know what's going to happen," said Rhonda L. Peters, an independent broker in Montclair. "We are concerned about small- and mid-sized groups racing to the bottom, buying on cost and not necessarily using an agent to do it."

"My concern is that small-business owners will say it's easier to let the government do it," said Clifton broker R. Thomas Siino, who has about 400 small-business clients with more than 3,000 employees.

"I think the bureaucrats have a misconception that all we do is wait around for a commission check. They have no idea how our clients rely on us," Siino said.

More than two-thirds of the small businesses that provide health insurance use brokers, according to the Kaiser Family Foundation. Policymakers have viewed broker commissions as an area where costs can be cut. On average, broker compensation accounted for 5 percent of premiums in the small-group market, or $15 per month per policyholder, according to the non-profit organization.

"The law will disrupt many elements of the insurance system that we value today," said Jack Mozloom, a regional spokesman for the National Federation of Independent Business, which led the court fight against the law.

"We have many members who are insurance brokers, and we deeply sympathize with them."

Under the law, insurers that serve individuals and small-employer groups must spend at least 80 cents of every dollar they collect in premiums on health care. It's 85 cents in the large-employergroup market.

Livingston broker Gregory Roth said several insurers he works for have lowered his commissions. Roth said he recently started selling property and casualty insurance in addition to life and health to offset risks posed by health care reform.

"I have to branch out to other things," Roth said.

"Everybody is going to have to adjust to thinner margins," said Matthew Roy, president of the New Jersey Association of Health Underwriters, which has about 15,000 members. But he doesn't see the health insurance brokerage industry fading away any time soon.

"We believe we add value, and if you add value in any industry you will survive. I don't think all of us will be out of business."

"The role of translator will be diminished, and they will play more of an adviser role," said Michael Mahoney, vice president of consumer marketing for Chicago-based GoHealth, which provides software for insurance brokers.

Even though the Supreme Court upheld the law, its future remains an open question as Republicans, including presidential front-runner Mitt Romney, say they want to repeal it next year, in whole or part.

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