We took advantage of this year's Benefits Selling/Oliver Wyman 2013 Health Care Survey to ask nearly 400 U.S. benefits professionals how the Patient Protection and Affordable Care Act would change their business models post-2014 and what strategic changes they were considering. We also asked them to predict what "value add" will look like in the post-reform world and how they are planning to compete. Here's what they told us:
It's happening
What a difference a year makes. When we surveyed benefits professionals early in 2012, they were dubious about the Patient Protection and Affordable Care Act, with roughly two-thirds of them predicting that the legislation would be scaled down or overturned altogether.
Just 12 months later — 12 months that included a Supreme Court ruling in favor of the PPACA and an Obama victory at the polls — they've changed their tune. Now nearly 80 percent of benefits professionals believe PPACA will be fully implemented sometime in 2014.
Though the formal launch of the public health care exchanges is still months away, new distribution models (including private exchanges in addition to the promised public exchanges) have already begun to disrupt the benefits marketplace. Producers are bracing for subsidized exchange marketplaces, rating standards, essential health benefits, and several new insurance taxes and fees, all of which go into effect in 2014.
Payers are moving in several directions. Some are strengthening their relationships with producers. Others, meanwhile, are taking more of an "arm's length" approach, slashing commissions and letting the channel compete against emerging distribution mechanisms. The channel is in need of a fresh, new approach to maximizing value if brokers are to meet the needs of clients and insurers.
Disruptive threats of the PPACA
More than 70 percent of respondents believe public health care exchanges pose a moderate or large threat to their businesses. The exchanges, of course, have a massive competitive advantage among consumers who qualify for subsidies, but benefits professionals also fear that automated functions such as transparency tools and decision-support mechanisms will erode the value provided by brokers in their capacity of advisors.
And although producers have had a few legislative wins recently (for example, requirements that commissions be equal on and off the exchange), they are still concerned about the convergence of new distribution models, MLR limits, and increased regulatory scrutiny of price.
Commission expectations
Consequently, producers expect all of these factors to continue to put downward pressure on per-unit commissions. More than half of respondents (54 percent) expect medical commissions to decline in 2014, compared to just 40 percent in 2012. About a quarter of respondents expect declines of 25 percent or more.
The insurer-broker relationship
The next few years will be a confusing time for health insurance customers, thanks to a variety of PPACA-related and non-PPACA-related factors including new benefit and rating standards, group erosion, an influx of the previously uninsured, and the rise of Medicaid. Employers and members alike will increasingly need the sort of guidance producers have traditionally provided.
Insurers understand that — but they also need to maintain reasonable profit margins amid the constraints of the changing marketplace. They are currently working to define their distribution strategies and understand how producers fit into them, but they haven't yet seen a clear demonstration of the long-term value of producers, and they need that to justify additional investments.
For their part, benefits professionals are cautiously optimistic, at least about the near term, with 77 percent predicting that insurers will either maintain or improve relationships with brokers in 2014. But the picture is less clear in the long-run. Insurers are still evaluating their options, and producers, especially in the small group and individual markets, need to determine how to differentiate themselves to meet stakeholder needs in the new post-reform market.
