Under Affordable Care Act, an uncertain future for insurance brokers

Peter L. Gualtieri listened carefully Monday as President Obama defended the Affordable Care Act against its critics. He was troubled by what he did not hear.

"The president never once mentioned brokers or agents," Gualtieri said. "He talked about the 1-800 number, the online websites, the navigators, but never once brokers. It was a little disheartening."

As president of the Greater Philadelphia Association of Health Underwriters, Gualtieri might be forgiven for having a somewhat narrow focus while listening to Obama's address about the rocky launch of ACA's online health-insurance marketplaces. For all the confusion that remains about the law and its impact, few would seem to have more reason to fret about the future than insurance brokers such as Gualtieri and his organization's members.

As a group, brokers occupied a lucrative niche in health insurance. They helped companies navigate the web of offerings so employers could provide employees the best coverage for the least cost. Some brokers do the same for individuals.

Their knowledge of the arcane rules and complexities of the marketplace contributed to their financial success and job security. Now, under the ACA, all that is changing.

With the online insurance exchanges launched Oct. 1, individuals will be able to access competing policies to weigh choices for themselves. Specially trained "navigators" have been contracted by the federal government to help consumers, in effect filling the role of brokers.

On Nov. 1, a similar online exchange will be launched for small businesses, further undercutting the traditional insurance broker's role.

Though Gualtieri and other brokers tried to accentuate the positive Monday by noting that the ACA's goal is to bring coverage to millions of uninsured Americans - and, in the process, expand the insurance market - it was hard not to see that there would be losers as well.

"There is going to be a fundamental shift in the way health insurance is delivered in the marketplace," said Scott Mardis, the underwriters group's past president and a senior business-development consultant at BenefitVault Inc. "Those brokers that can accept that and adapt will be successful, but I'm not sure all of them will be able to."

Many brokers are now "CEO- or CFO-focused," Mardis said, meaning they offer services directly to top managers looking to provide companywide health insurance.

As more individuals and small companies turn to online marketplaces, brokers will need to find ways to sell policies directly to employees. That move from the wholesale to the retail will be difficult and less lucrative.

"It will be incredibly daunting," Mardis said. "A good number of small-business brokers will not be able to make this transition and will steadily lose business."

Tom Baker, a University of Pennsylvania law professor studying the online exchanges set up by individual states under the ACA, also sees the broker's role diminishing.

"Despite all the stories about the problems with the website, it is eventually going to work," Baker said. "People are going to be going online to purchase insurance. And that means they are not going to need a broker."

Brokers who deal directly with small businesses will still be in demand to guide employees through benefits plans, he said, and some are creating private online exchanges of their own where individuals can shop for policies.

At the moment, David Cagliola is one broker who has few complaints.

"Our phones are ringing off the hook," said Cagliola, senior vice president of Radnor Benefits Group in Wayne. "Our clients are confused, they don't know what to do."

Yes, he expects his job to change, but not necessarily in a bad way.

"You did not need to go to school to get into the insurance business," he said. "You could be successful if you were a good salesman. Now you are going to need to be an adviser. You are going to need to be a consultant."

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