Although the 2010 PatientProtection and Affordable Care Act (PPACA) is currently underscrutiny by the U.S. Supreme Court for possibly beingunconstitutional, many states are still pressing ahead with settingup insurance exchanges.

A requirement of President Obama's health-care reform law isthat all states establish health-insurance exchanges to provide amechanism to funnel federal subsidies and make it easier forconsumers to shop for insurance policies.

These exchanges could have significant impact on agentsand brokers—especially those who facilitate policies primarily forindividual and small groups of fewer than 50 employees.

States can set up separate exchanges for the individual andsmall-group markets or combine both markets into one exchange. Thestates will then approve which carriers will be certified to sellindividual and small-group plans through the exchange. Underwritingand pricing of these policies is subject to rules contained in thePPACA.

The state or federal exchanges will also administer the premiumtax credits available to certain qualifying individuals. Beginningin 2014, individuals with incomes less than 400 percent of thefederal poverty level, who do not have affordableemployer-sponsored health insurance, may qualify for federal taxcredits to be used toward the purchase of individual healthinsurance.

For example, a family of four would be below 400 percent of thepoverty level if the household income is less than $89,400. Thiscould represent a sizable portion of the American population thatis entitled to subsidies if affordable insurance is not availablethrough their employer-sponsored plans.

If the law is struck down by the high court, federal money wouldnot be available to run the exchanges or provide the subsidies tohelp lower-income workers buy coverage. Thus, this new statebureaucracy will be competing for scarce resources.

Millions of taxpayer dollars will be spent to establish aninsurance market that basically duplicates what is available todaybut may have no teeth since individualswon't be required to purchase insurance. The dilemma for states isthat under the PPACA provisions, they have to be able todemonstrate that they can operate an exchange by Jan. 1, 2013.

If the Supreme Court does not issue its ruling until sometime inJune, this will make it very difficult to finalize the necessarystructure of the exchange to show that it is operational unless thestates continue to work on the structure now.

The governors of Colorado, New York, Rhode Island and Californiacurrently plan to move ahead with their exchanges.

Although the exchange provides opportunity for agents andbrokers to be “navigators” to assist buyers, many buyers could justview the exchange as a replacement to their current agent orbroker—which means a lot of potentially lost income.

The argument lies with whether the exchange will provide a fairplaying field against traditional insurance-purchasing or whetherit will, over time, become a convenient way to cut the brokerout.

It also remains to be seen how an agent or broker becomes anavigator and whether they will be fairly compensated.

Regardless of the exchange's ease of use, businesses will stillneed guidance on overall benefit design and what benefits will helpattract and retain good employees.