Smaller agencies sellingemployee-benefit services face increased compliance demands andlower commissions now that the health-care-reform law has beenupheld by the Supreme Court, but agents aren’t throwing in thetowel just yet.

“For years people have predicted the demise of one aspect of theindependent agency system or the other and [said] we were going togo the way of the buggy-whip manufacturer,” says Alex Soto,president and CEO of Miami-based InSource Inc. and former presidentof the Independent Insurance Agents & Brokers of America. “Thefact of the matter is that agents are alive and well, and we havean uncanny ability to find the niches where we can be helpful toour clients.”

One major concern resulting from the new health-care environmentis compensation. Because health-care companies are obligated underthe health-care-reform law to spend no more than 15-20 percent ofpremium dollars on administrative costs, carriers will be forced tocut expenses—under which agent commissions fall, according to thecurrent medical-loss-ratio formula. Agents have unsuccessfullyfought to have their commissions excluded from the limitedadministrative expenses.

Andrew C. Harris, president of Liberty Insurance Associates inMillstone, N.J. and president-elect of the National Association ofProfessional Insurance Agents, says while agents will make lessmoney, they will have to do more work, as there will presumably bemore compliance issues to address and more paperwork to file. Headds that agents will have to compensate by finding other forms ofcompensation. That will mean expansion of some services such aslife products, voluntary benefits, disability, long-term care andother related policies that will expand the agency’s revenuestream.

Agents will also need to pursue more fee-for-servicearrangements with clients in lieu of commission.

Harris, though, says as long as clients turn to their agents foranswers, agents will have to find ways to provide them. “Thetakeaway is that our clients still want and need an advocate forthem,” he says.

Meeting these new challenges, he adds, “will force us to bebigger and stronger benefit managers and not just health-care[insurance] providers. If we look to be something new anddifferent, let’s not do it halfway—let’s do it all the way.”

Indeed, those agencies that successfully reinvent themselves askey consultants could see new business, driven by clients that nowneed to start offering health care under the law’s mandates.

Mike Brewer, president of Lockton Benefit Group, a division ofthe insurance-brokerage firm Lockton, says the Supreme Court’sdecision will mean a lot of people will need to make decisions onhow to provide coverage for their employees.