Will Health Exchanges Make Insurance Agents Obsolete?

Mar 25, 2013

Insurance exchanges coming in 2014 will allow individuals and small businesses to compare and shop for health plans. This will be done online, and it means people can bypass traditional insurance agents and go straight to the product.  And that has health insurance agents concerned, because they make money on commissions – and they wonder what their role will be.

“Well, that’s a great question [laughs] and frankly, most of us don’t know the answer, in the context of the exchange,” says Kyle Ulrich, Senior Vice President of Public Affairs for the Florida Association of Insurance Agents.  

Right now, state-licensed agents work with consumers and businesses, earning commissions on what they sell. The federal health law outlines a different group of workers called “navigators” to do a similar task on the insurance exchanges, and that service is free for the shopper.

“That individual market place, for agents who occupy that space, it’s a scary time, because they see the typical distribution channel  through agents being troubled when we start talking about these exchanges and so forth, and the health insurance product becomes very commod-itized,” said Ulrich.

But health insurance agents say it’s not just about the money. They’ve have had extensive training. They have to be insured to make sure they don’t give bad advice, and if they do, they can be sued. That’s not true for navigators, and FAIA’s Urlich says the issue is largely about protecting consumers.

We don’t have a problem with navigators being there to help folks sign up for the exchange. That’s what they’re there for and that’s fine. What we firmly believe is that they’re not there to sell insurance. And to the extent that there might be conversations between a navigator and a consumer that goes outside that purview, we believe there should be an enforcement mechanism.”  

The insurance industry is pushing states to place additional regulations on the navigators. Even though Florida has decided to let the federal government run its exchange, Florida will still have a say on regulating the people who will work behind the scenes in those marketplaces.

“Our idea would be to let the Department of Financial Services to issue a license,” said Tim Meenan, with the National Association of Insurance and Financial Advisors, said in public testimony before the Senate Select Committee on the Patient Protection and Affordable Care Act.

“Make them take some training. If they do something untoward toward a customer, you can put them out of business. And frankly, we think they should be required to only talk to people who are uninsured.”  

Insurance agents want the navigators to defer to them when it comes to helping consumers make purchasing decisions, and they say they’re confident they’ll get some regulations in Florida. States like Virginia, Ohio and Utah have legislation pending that would place strict regulations on the navigators. But one area the state won’t have a say in, is who gets to sign up to be a navigator.

“The navigator program, it’s not that they’ll be selling insurance product. It’s designed to be an outreach assistant. To help people understand, to “navigate” the new system,” argued Karen Woodall, a lobbyist and Executive Director of the Florida Center for Fiscal and Economic Policy. 

She says it will be up to the federal government to pay for, and register, those navigators. And she disagrees with insurance agents who say the navigators should be subject to additional state rules and regulations, because they won’t be performing the same tasks.

“It is a program that will be monitored by the federal government.  You will have to apply. You will have the training, just as other people who are giving information through outreach,” she said.

“The intent is, we focus primarily on community-based organizations where people have a relationship and trust. It’s not something anybody signs up for and doesn’t have to have training, and that they’ll be trying to coerce or encourage people to buy a particular product.”   

Groups like local chambers of commerces, unions or consumer-advocacy organizations can sign up for the navigator program. Navigators will be paid through fees imposed on insurers through the exchanges. The federal government will give out grants to groups to fund the navigators. The health law says navigators can only be paid for helping with enrollment, and not on the commission-based pay system that insurance agents usually work on. And that means health insurance agents can’t sign up to be navigators, and navigators can’t be health insurance agents.