Insurance agents, brokers and small insurance companies are among those who may have to scramble to stay afloat over the next few years. This is partly by design and partly an unintended consequence of a new law that is so sweeping, it will affect nearly every corner of an industry that accounts for one-sixth of the U.S. economy, says Time:
Under the Affordable Care Act, beginning in January, plans sold to individuals and small groups must spend 80 percent of premiums on actual medical care (as opposed to administrative costs); the figure is 85 percent for large group plans.
Plans that spend less will be required to send rebates to customers.
The National Association of Insurance Commissioners (NAIC) counted agent and broker commissions, which can make up 5 percent to 20 percent of premiums, in the administrative category.
Most experts, therefore, predict these commissions will be on the chopping block as insurers scale back administrative expenses to comply with the new rules.
Agents and brokers are also worried about the future for another reason: a vital part of their current role, sales and marketing, could be made redundant thanks to the new state insurance exchanges that will go online by 2014:
These Web-accessible marketplaces will be where individuals and small groups go to purchase insurance.
In addition to listing plans available by location, the exchanges will post quality and price information and administer federal subsidies for those who qualify, making it easier for individuals and small-business owners to compare plans and choose the options that best suit their needs.
Brokers and agents have to hope there will still be demand for their help in navigating the maze of health insurance, says Time.