In a 2012 study from eHealth Inc., less than one-third of smallbusinesses polled knew if they needed to provide healthcareinsurance for employees. Research conducted earlier this year from the Kaiser FamilyFoundation revealed that 42 percent of Americans didn't know ifthe Patient Protection and Affordable Care Act (PPACA) had beensigned into law or not.

Uncertainty may reign outside the insurance sector, butindependent agents and brokers are quickly getting up to speed onthe details of healthcare reform and its implementation timeline.Agents also are learning how fundamental changes in the way peoplepurchase health insurance will shape the agency of tomorrow.

Related: Read “PPACA Creating 'New Clients,Prospects and Mergers.'”

Trusted advisors take center stage

The confusion surrounding healthcare reform plays to agents'expertise as trusted advisors, said Andrew C. Harris, CIC, CPCU,president and CEO of Liberty Insurance Assocs. in MillstoneTownship, N.J. and president of the National Assn. of ProfessionalInsurance Agents (PIA National). He said that agents may beuniquely qualified to guide people through the various mandates andlegislation related to PPACA.

“Who else has the insurance knowledge, the relationships withthe clients, and the ability to inform, educate, and roll out theseprograms other than insurance agents?” he asked. Employers andindividuals already look to agents for direction in the riskmanagement process, and Harris said that producers are the “logicalsolution” to the need for far-reaching education as the countrytransitions into healthcare reform.

Related: Read “Producers' Role in the InsuranceExchanges.”

The need for reliable guidance is so great that the servicesavailable through agents and brokers may soon have nearly as muchvalue to clients as the products themselves.

It's a shift that will cause agents to take on a moreconsultative role going forward, said Jay A. Jensen, CPA, managingmember at Insight Benefits Group in Bloomington, Ill. “Clientstoday are just very unclear on what all this healthcare reformreally means, how it's going to affect them, and what they have todo,” he said.

People have a lot of questions, and Jensen said the lack ofunderstanding among clients is likely to create opportunities foragents to build stronger and potentially more lucrativerelationships with them. “The more complicated it gets, the morethese advisors are needed,” he said. “Agents have got to changetheir roles from more of a sales product provider to a professionalconsultative advisor.”

Brokers will be called upon to demonstrate their advisory skillsearly in the process, as employee-focused communications getunderway in earnest. The burden on employers to provide newinformation (summary of benefits coverage, details of exchangeavailability, etc.) is growing. Even if employers choose not tooffer coverage and instead direct their employees to an exchange,many of them will still be affected by new requirements.

Jonathan Bryer, vice president at Liberty Insurance Assocs.,pointed to one mandate that goes live on Oct. 1. “It's whenemployers of any size, whether they offer coverage or not, arecompelled to notify all employees of the existence of the stateexchange.” That holds true whether the employer is in a state usingits own model or in one of the 26 states that have opted for afederally run exchange.

To ensure compliance with these new regulations, many clientswill look to agents not only for guidance on what is required ofthem, but for help in understanding other obligations and thetimeframes for each phase in the rollout. “Whether it's a newclient or an existing client, we have to lay the foundation of whatthey need to do,” Bryer said. He encouraged producers to considerdrafting the necessary documentation for clients, who may bedealing with a crush of reform-related activities as well as thebustle typical of open enrollment, which is happening around thesame time for many companies.

Staying updated

Brokers will need a detailed understanding of PPACA before theycan provide clients with knowledgeable advice. Bryer participatesin the National Assn. of Health Underwriters (NAHU) at the localand national levels. “We were just at a 3-day conference witheducational classes held by various experts,” Bryer said. Theorganization also emails updates and even offers a mobileapplication, so agents are alerted to the latest developments nomatter where their work takes them. Bryer said another approachthat he's found helpful in preparing the agency to anticipateclients' needs is to learn more about healthcare insurance reformin Massachusetts, a program that has similarities to PPACA.

Agents will likely find other resources that are helpful incoping with evolving compliance mandates and a growing workload ofone-on-one interactions. Calculators are available that show howhealth insurance decisions will affect individuals as well as­businesses. They're one of the tools to help guide clients to thesolution that best fits their needs, Jensen said. A calculator cangive employers insight into a variety of what-if situations by“taking all of the clients' data—their population, their currenthealth plan, income of the employees, and other factors needed todo an analysis—to see, when Jan. 1, 2014 hits, what the financialimpact is if they keep their plans exactly how they are, if theyreduce their plans to, say, the minimum that's required under thelaw, or if they terminate their plans altogether,” he said. Themore advanced calculators will also help agents provide a pictureof what any penalties or taxes may look like depending on whichroute the employer chooses.

The changing revenue stream

Although the types of support that agents and brokers offer arestill evolving, a more fundamental change is how they'll be paidwhen the health insurance exchanges come online. Unlike grouppolicies, which will route directly through the carriers, insuredsgoing through the exchanges will be on individual policies.

“They've taken a page out of the senior care market,” said JohnSarich, vice president of strategy at Coconut Creek, Fla. -basedVue Software. “They're not paying commission per se, but paying afee that is somewhere in the $6 per member per month range.” That'sabout a quarter the typical fee seen by agents working in the groupmarket under the current structure. “Consequently, agents are goingto take a very big hit,” Sarich said.

Along with the change in the pay formula and additional timeneeded to educate clients on each step in the PPACA process, thepurely administrative service load on agents is also going up.Because producers will now be exposed to far more individualpolicies, some potential downsides could be on the horizon.

“They're going to have to deal with all of the late pays,cancellations, and reinstatements,” Sarich said. Other supportprograms are also dovetailing into the exchange system, givingagents a host of new tasks they haven't had before. “In addition tobeing the agent as they talk to a potential insured, if theyidentify that a person is eligible for food stamps or any kind offederal social programs, they're supposed to sign them up for thatas well,” Sarich said.

Among the challenges, opportunities

Increased responsibilities combined with a squeeze oncompensation are resulting in pressure within agencies to deal withthe current benefits dilemmas in a sustainable way—a situation thatHarris believes is really an opportunity for agents who can thinkoutside the conventional client relationship. Rather than dealingwith just the employer, agents will now have direct access toemployees—lots of employees. “If we start looking at voluntarybenefits and products that we might be able to sell to employees,it's just possible we could make up some of the compensationshortfalls,” he said.

Products and services such as wealth management and disabilitycoverage may provide good inroads to this new client base. Butagencies that aren't ready to recognize and seize on thesepotential opportunities, that instead choose to “live and die bygroup insurance,” could find their revenue stream slowing to atrickle, Harris said.

And although much of the landscape remains a moving target, withuncertainty about how the future will unfold and how consumers willreact to their new insurance options, remaining ready to seeopportunities and pounce on them will be key to survival.“Insurance agents are very resilient,” Harris said. “They're veryknowledgeable, and as long as we can take advantage of thatknowledge, we should be able to get through this and help ourcustomers and our customers' employees navigate through this.”

Keeping the potential for an increased voluntary benefits marketin mind, producers will be in a prime position to provide employeeswith products that meet a new set of needs born out of therecession. “Employees may now need to rebuild assets,” said WilliamC. Barr, CEO of Portland, Ore. -based LifeMap Assurance. “If thereare benefit opportunities that allow employees to rebuildassets—assets that historically may have sat in their homes or intheir savings accounts, and that are significantly depleted now—anagent has an opportunity to bring good value there.” More employeeswill also be looking for ways to protect the assets they do have.This may lead to fruitful discussions about products such ascritical illness coverage, short- and long-term disability anddental plans.

Related: Read “Private Exchanges a Solution, butNot for All Insurance Agents.”

Life insurance products are likely to be fertile grounds forastute agents, Barr said. “Many employees don't realize that thelife insurance typically offered to them through their employer,which is a wonderful value, terminates at the point they leaveemployment. Agents are now in a great position to help educate themaround how to make purchases for permanent life.”

Younger populations of employees are becoming more interested inlife insurance products, perhaps because they realize they may notenjoy the rate of growth in their personal assets—such as theirhome—that their parents did. It's this greater desire for assetprotection that could drive increased interest in life insuranceand other voluntary products.

Healthcare reform is sure to prompt changes and tough decisionswithin agencies—Does it make sense to focus on individuals orgroups? How do we balance time commitments between advising clientsand closing out administrative tasks?—and some firms will begin togrow in new directions. The ability to create a sustainable revenuestream may hinge on how well agencies identify and embrace theopportunities that are right for them.