Every change in the insurance industry presents both challengeand opportunity, and the Patient Protection and Affordable Care Act(PPACA) is no exception.

"The PPACA has provided a lot more opportunity for agents andbrokers to act as advisors," says Michelle Lewis, director ofproduct management at Vertafore.

Kathy McCarthy, director of health insurance for Oracle,believes brokers' advisory role will evolve—and become increasinglyimportant—as the law shifts emphasis in the marketplace fromworking with businesses to working with individuals.

"Their challenge for brokers is how to make individualsunderstand all the complexity of health insurance," she says. "Mostpeople aren't accustomed to spending time analyzing differentinsurance plans—they just pick one their employer has put together.Brokers need to not only understand differences among plans, butbecome experts at conveying information about those differences toconsumers."

Conveying information to consumers or employers presents atechnological challenge for brokers who need to be sure they arecompliant with PPACA rules regarding data collection, documentproduction and other regulations. 

"The situation is complex because agents need to consolidateinformation about plans in the exchanges with plans that they offerso that consumers can do an adequate comparison," says DeniseGarth, partner and chief digital officer at Strategy Meets Action(SMA).  

"We need to have access to many different sources of informationand many different resources to provide the right advice," saysBrent S. Rineck, chief information officer at ABD Insurance andFinancial Services in San Mateo, Calif. "There is a handful ofcompanies that have popped up with the purpose of filling the gapbetween what had been available in the marketplace and what thePPACA requires, and we've been successful utilizing several ofthem."

Applications of several web-based PPACA-tools at ABDInsurance reflects a growing trend among brokers of turning tospecialized technology solutions to address compliance needs. Theagency uses sales support software from Code SixFour to help withvoluntary benefits recommendations and employee communicationstrategies. Tools from Verisight help ABDInsurance determine the financial impact of "pay or play"requirements for employers assessing whether to continue to offerhealth insurance ("play") or pay a penalty.

The Verisight solution performs required actuarial valuecalculations, which relate to the average share of medical spendingthat is paid for by a plan as opposed to by the plan members. Thosevalues are tied to each plan's cost-sharing requirements andcovered services.

"We could manually create those values through spreadsheets orother means, but that does take a lot of time. We also don't wantto take on the liability for making an incorrect calculation ofplan value. The software allows us to easily create different valuescenarios for employers," Rineck says. 

Payer Pains

Healthcare reform also has created complexityand compliance challenges for insurers, which will ultimately havea trickle-down impact on the broker community. New requirementsapply to information on plans that must be provided to consumers,such as the Summary of Benefits and Coverage document (SBC). SBCsare designed to present information to consumers in a standard,plain-language format, allowing them to easily compare benefitsamong different plans.

"The first problem we've seen with creating SBCs is that thereis no central repository for plan information at most health carepayers," says Lori Dustin, chief marketing officer atHighRoads.

"The center of the universe for payers has always been theirclaim system, which makes total sense because that is where theirservice had been focused," she explains. "However, they are nowfinding that those legacy, claims-based systems, and the tendencyof data to exist in multiple instances across the organization,creates a real challenge when trying to compile the plan designdata needed for the SBC."

Although the SBC may seem like a straightforward document,creation of the standardized, four-page form has been anything butsimple for insurers because of the way data needs to bedisplayed.

"In their first attempts [to create SBCs], insurers wereproducing error-ridden documents because data didn't exist, or itexisted in a way that was so codified from a claims perspectivethat it was difficult to use. When they could produce the data,they often ended up with documents that were far too long becausetheir systems couldn't handle the formatting requirements," Dustinsays.

The PPACA's shift in focus from employers to individualconsumers has also created technology-related problems for healthinsurers.

"Most [health insurers'] systems were built under the premisesof a group insurance-based model where employers are being insured,not individuals who all have different premiums. Rating and billingengines can't necessarily adapt easily to the individual market,"McCarthy says.

Problems faced by health insurers will impact brokers as well,beginning with the lack of centralized plan information.

"Often in the sales process, producers may start with a standardplan design but then provide riders or customize plans. Currently,there is often no 'self-service' way for producers to modifystandard plans in the database and produce the needed documents forcompliance," Dustin says.

Brokers are also dependent on the data, documents, and processesof payers to complete the sales process.

"Without payers being automated, and data managed at the source,it is difficult for brokers to deliver the level of servicebusinesses and consumers want," Dustin explains. "Brokers oftenhave to involve the insurer, which adds complexity and time to thesales process."

Health insurers do recognize the lack of automation in the salesprocess and problems related to the absence of centralized planinformation. Most insurers are assessing plan managementtechnology, but bringing new systems into the environment presentsintegration challenges.

"Payers have multiple, legacy claim systems, and those systemsare not going to be simply ripped out and replaced. They have toco-exist with any new benefit plan system," Dustin says.

Data Collection Challenges

A key compliance challenge for health insurers around the PPACAis the need to collect new data points. Plans that are part ofaccountable care organizations need to reimburse providers based onperformance. That requires assessing the quality of care, but datato perform that assessment has not been part of the claim-payingprocess to date.

"On the payer side, there is often little or no data collectionor aggregation of consumer engagement andoutcomes," Dustin says.

"Providers have clinical data that insurers don't have, andinsurers have data that providers don't have. To effectively meetthe new regulations for the PPACA, which is affordable care at areasonable cost, you need both types of data to do accurateanalytics," McCarthy says. "Getting that information into one placeis the big challenge."

Even the data exists, it may not be in a format that lendsitself to easy analysis.

"Some of this data is nontraditional. It's written documents,it's medial charts, it's lab findings, it's patient survey data,"McCarthy explains. "There is a big challenge in retrieving data andfiguring out how to house that data before insurers can even beginlooking at analytic solutions."

The PPACA also requires health insurance issuers to submit dataon the percentage of premiums spent on clinical services, known asthe Medical Loss Ratio (MLR). A minimum MLR of either 80% or 85% isrequired depending on the plan. Insurance companies that fail tomeet that ratio will be required to provide a rebate to their planmembers.

The MLR requirement isn't just a data challenge: it represents asignificant change to the expense model of health insurers.

"Most companies had run a 30 percent expense ratio. Now theyneed to cut that to 15 or 20," says John Sarich, vice president ofstrategy, VUE Software.

"That really puts insurance companies in a bind," he adds. "Theyneed to invest in technology to meet new compliance mandates whilecutting expenses at the same time. Unfortunately, brokers andagents will see the brunt of the reduction—their commissions arebound to take a huge hit."

P&C to Feel the Pain?

P&C insurers will not be exempt from the impact of thePPACA. Most of the discussion has been around how greaterutilization of health care, driven by an increase in the insuredpopulation, will impact access to providers and costs of bodilyinjury and workers' compensation claims. Additionally, some expectthat PPACA regulations will have an impact on P&C operationsand technology as well.

"When there is a bodily injury accident, for example, it's quitepossible that P&C insurers may need to start integrating withnetworks or other companies to share data relative to injuries ordetermine whether and where coverage applies," Garth says.

"If I cut my finger at home and am covered under my health plan,that falls under one type of coverage and one fee schedule. If Icut it at work, it's a totally different coverage and fee schedule.It won't take long for that to change," Sarich predicts."Government doesn't shrink, it grows."