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

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

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

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

Conveying information to consumers or employers presents a technological challenge for brokers who need to be sure they are compliant with PPACA rules regarding data collection, document production and other regulations.

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

"We need to have access to many different sources of information and many different resources to provide the right advice," says Brent S. Rineck, chief information officer at ABD Insurance and Financial Services in San Mateo, Calif. "There is a handful of companies that have popped up with the purpose of filling the gap between what had been available in the marketplace and what the PPACA requires, and we've been successful utilizing several of them."

Applications of several web-based PPACA-tools at ABD Insurance reflects a growing trend among brokers of turning to specialized technology solutions to address compliance needs. The agency uses sales support software from Code SixFour to help with voluntary benefits recommendations and employee communication strategies. Tools from Verisight help ABD Insurance determine the financial impact of "pay or play" requirements for employers assessing whether to continue to offer health insurance ("play") or pay a penalty.

The Verisight solution performs required actuarial value calculations, which relate to the average share of medical spending that is paid for by a plan as opposed to by the plan members. Those values are tied to each plan's cost-sharing requirements and covered services.

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

Payer Pains

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

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

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

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

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

The PPACA's shift in focus from employers to individual consumers has also created technology-related problems for health insurers.

"Most [health insurers'] systems were built under the premises of a group insurance-based model where employers are being insured, not individuals who all have different premiums. Rating and billing engines 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 standard plan design but then provide riders or customize plans. Currently, there is often no 'self-service' way for producers to modify standard plans in the database and produce the needed documents for compliance," Dustin says.

Brokers are also dependent on the data, documents, and processes of 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 service businesses and consumers want," Dustin explains. "Brokers often have to involve the insurer, which adds complexity and time to the sales process."

Health insurers do recognize the lack of automation in the sales process and problems related to the absence of centralized plan information. Most insurers are assessing plan management technology, but bringing new systems into the environment presents integration challenges.

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

Data Collection Challenges

A key compliance challenge for health insurers around the PPACA is the need to collect new data points. Plans that are part of accountable care organizations need to reimburse providers based on performance. That requires assessing the quality of care, but data to perform that assessment has not been part of the claim-paying process to date.

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

"Providers have clinical data that insurers don't have, and insurers have data that providers don't have. To effectively meet the new regulations for the PPACA, which is affordable care at a reasonable cost, you need both types of data to do accurate analytics," McCarthy says. "Getting that information into one place is the big challenge."

Even the data exists, it may not be in a format that lends itself 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 and figuring out how to house that data before insurers can even begin looking at analytic solutions."

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

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

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

"That really puts insurance companies in a bind," he adds. "They need to invest in technology to meet new compliance mandates while cutting expenses at the same time. Unfortunately, brokers and agents will see the brunt of the reduction—their commissions are bound to take a huge hit."

P&C to Feel the Pain?

P&C insurers will not be exempt from the impact of the PPACA. Most of the discussion has been around how greater utilization of health care, driven by an increase in the insured population, will impact access to providers and costs of bodily injury and workers' compensation claims. Additionally, some expect that PPACA regulations will have an impact on P&C operations and technology as well.

"When there is a bodily injury accident, for example, it's quite possible that P&C insurers may need to start integrating with networks or other companies to share data relative to injuries or determine 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 I cut 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."

Special Reports /

Agents Must Transform Their Role and Their Tech to Comply with PPACA

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