Will PPACA put advisors out of work?
By Emily Hutto
The number of insurance advisors is expected to decrease 1.2 percent each year over the next five years. What we don’t know though, is if PPACA is directly responsible for putting these advisors out of work, or where the out-of-work advisors will end up next.
Shortly after the Patient Protection and Affordable Care Act (PPACA) was upheld this summer, Forbes came out with an article predicting what the health care reform would do to the insurance industry. “The floodgates are about to open for the mass firing of healthcare insurance agents,” it states.
The article goes on to explain that PPACA will create more low-cost insurance products to make health care available to the masses, and there won’t be room for advisor commissions in the new products. “Make no mistake,” it says, “the volume of business underwritten by agents will dramatically drop.”
So where will all the agents go? Mike Tripses, the president of Creative Marketing, an insurance marketing organization (IMO), guesses that a lot of them could get jobs at IMOs. “IMOSs have been seeking highly experienced and trained insurance salespeople to distribute life insurance and annuities for decades,” he says. “Training new agents from scratch is not the plan of any IMO I know. So it sounds enticing to recruit trained, licensed salespeople with insurance knowledge from a sibling industry.”
Easier said than done, though. “For some reason, it’s tough to convince an agent to be a generalist or a multi-specialist,” says Tripses. But despite the challenges of moving from a comprehensive insurance approach to specializing in one kind of insurance, he maintains, “I definitely think there is promise in recruiting these agents.”
“The best agents look holistically at their clients to be sure they have addressed all of their financial security needs,” says Janet Trautwein, CEO of the National Association of Health Underwriters. She completely disagrees with the position take in the Forbes article stating that the number of health care insurance agents will decrease.
“Absolutely not,” she says. “There is a great deal of uncertainty about what the future holds right now, and when we read articles like the Forbes article, it only serves to increase the anxiety level of agents and brokers. The statements in this article reflect a lack of knowledge of the insurance industry and certainly a complete lack of knowledge of the role played by agents in brokers in bringing health insurance and other important coverage to individuals, families and businesses.”
She continues, explaining that despite the number of advisors out there, there will certainly be room for advisor commissions in the prices of new insurance products. “The state exchanges, both those run by states and those run by the federal government on behalf of the states, are definitely planning on using agents and brokers in the same way they are used today relative to the sale of plans in the exchange,” she says. "And there is, of course, no reason to believe that coverage outside of the exchanges will be using any other mechanism.” There’s no denying that the number of insurance agents is, in fact, dropping. Cerulli Associates' latest brokerage industry market share report says that there are 7,000 fewer advisors in 2012 than there were in 2011, a 2.3 percent decrease. That number is expected to decrease another 1.2 percent each year over the next five years. What we don’t know though, is if PPACA is directly responsible for putting these advisors out of work, or where the out-of-work advisors will end up next.
Advisors in the midst of this turmoil can use PPACA as an opportunity to rebuild their practices, says Troutwein. They can become more active in advising their clients on compliance issues, and talk to their clients about their new needs.
As far as NAHU is concerned, the organization is dealing with PPACA head-on by promoting legislation in the House and Senate to remove agent compensation from the MLR formula. They are hoping the legislation will pass this year after the elections.
“The PPACA is a final stage in the evolution of health care insurance or delivery in the U.S.” says Tripses. “I hold as a practical principle that the more you insulate citizens from the cost of their decisions and services, the higher the cost becomes. Also, the more government tells everyone what they must buy and consume in a one-size-fits-all manner, the more it limits innovation and diminishes individual freedom to satisfy a politician or regulator’s vision of what’s best for society. PPACA is a huge step down that road.”