PPACA is Coming: Prepare for Next Year
By John Sarich
In just six months, all health insurance exchanges must be certified and operational under the Patient Protection and Affordable Care Act (PPACA). The exchanges will open to consumers less than a year later, on Oct. 1, 2014. The move that carriers and agents alike have been awaiting with a mix of dread and confusion will go into effect.
The PPACA was developed because the United States spends twice as much on health care as other developed nations with less than optimal results. This is due in part to high standards of care, but improvements in efficiency in the health care sector are long overdue. Health Insurance Exchanges, the marketplaces from which consumers will buy insurance to encourage fair prices and competitiveness, will be run by the states or private entities. Both producers and carriers alike may have had a taste of what PPACA means for their business by interacting with another government agency and program: the Centers for Medicare and Medicaid Services and Medicare Advantage. While much remains to be seen about how the HIXs will operate, selling via the exchanges will by no means be a replica of the Medicare Advantage process.
For every insurance professional sweating the change, there’s one who’s convinced that the government is just blowing smoke regarding either date or the specific provisions. Regardless of your stance, both carriers and agents would be best served by preparing now – before mandates go into effect.
Realize that the current timeline is an ambitious one that technology vendors and insurers selling qualified health plans (QHPs) need to keep in mind when preparing systems, processes and procedures. It’s estimated that the Affordable Care Act will enroll 22 million new patients at a time when health care has become one-sixth of the U.S. economy. Designed to facilitate transparency and offer more options for the uninsured, the exchanges must allow patients sufficient time to enroll. Changes to the way insurance is bought and sold will be the largest revolution.
Changes for Agents For agents, PPACA will require a complete overhaul of not only the way you do business, but the way you approach each client. Yes, the amount you gain from each customer may drop – but you’ll conceivably make up for it in volume. Realize that per member, per month compensation isn’t inherently evil. As much as implementation is about changing workflow, it’s also about changing one’s approach to the business of selling. PMPM levels the playing field when it comes to sales, reframing the process in terms of customer service.
Retail agents will see the most disruption in their day-to-day routine. A relatively streamlined process will be supplanted by a rigorous service load, with cookie-cutter policy purchases for a given group giving way to individual applications that will likely be wildly different. Take a small, 50-person company, for example. Instead of writing one group policy, you’ll be tasked with writing 50 different policies. The solution? Be flexible, and implement changes to workflow now before ordered by a mandate. If your carrier will be adopting new processes to handle either individual policies or compensation, investigate what the potential impact might be now. As with anything related to a government mandate, the timing and impact on insurance professionals will evolve as policies are implemented.
Changes for Carriers Now is not the time to ignore the investment you’ve made developing relationships with agents and positioning yourselves as attuned to their needs. While the compensation issue is one of the few pieces of the Affordable Care Act puzzle that we can make an educated guess about, the entire process will be more of a challenge. Simply put, you can’t rely on the same Excel formulas that you’ve had in place for years. Transitioning from straight commission to per member, per month compensation alone would require an overhaul of existing systems, but the complexity of compensation management systems will increase along with the quantity of calculations that need to be done to compensate just one agent. Upgrading to modern, efficient and customized onboarding and compensation systems is no longer a luxury, but a necessity. At VUE Software, we like to put the process in terms of agent relationship management, or ARM. With consumers under an exchange system, the only thing that will make your company stand apart is customer service. Similarly, don’t neglect agent relationship management or apply the same CRM tools and processes with agents that have a different perspective and different needs. If nothing else, reconciliation is a long and often unnecessary process, one that can be avoided with proper software and procedures. The demand for policies will also increase the demand for qualified agents. With the projected influx of 22 million customers as the exchanges open, carriers will need to cut the onboarding and license verification process from the current one to three weeks down to a matter of hours. The younger agents you work with may have never used a fax machine; why let a faxed or mailed application be the introduction to your company and an indicator of the level of technology in use?
Fundamentally, insurance is a commodity product. The only way to raise both profits and employee and customer morale is through improved customer service. While process shouldn’t get in the way of business, it’s worth considering how PPACA will impact day-to-day administrative processes and ultimately the customer experience.
Recommendations for Carriers
• Don’t underestimate the amount of time it will take to implement technology . At VUE Software, we have systems that could easily be connected to other enterprise systems in a short time frame. The term “short” is relative here, however. Because software of this nature is fully customized and the regulations so complex, even connecting two similar systems could take months. Two to three months is the minimum amount of time that most technology vendors will need to implement an off-the-shelf system.
• Smaller companies: This is your time to shine. We’ll most likely see larger companies acquiring smaller companies that have learned how to implement PPACA well rather than going to the additional expense and training of learning how to comply with regulations and sell effectively.
• Money spent on technology is generally money well spent . Regulations may evolve, but will most likely be implemented in some form in the coming weeks. Despite skepticism, the exchanges ultimately streamline administrative expenses and will gain favor with other insurers.
Recommendations for Producers
• In terms of commission models, look to Medicare Advantage . The QHP market of the next few months may look as today’s Medicare Advantage exchange does. While the ultimate premium has yet to be determined, the consensus is that PMPM will translate to a commission percentage of 1 to 2 percent, or $6 PMPM.
• Don’t skimp on customer service . Even if you’re already selling via Medicare Advantage, selling via the PPACA exchange will be markedly different from a customer service perspective. Whether or not you double as a navigator, consumers will be full of questions. A recent survey indicates that two-thirds of Americans are unsure whether they will buy insurance from the exchanges, indicating that more questions will follow when it comes to deciding on a plan.
• Anticipate competition . According to the Center for Consumer Information and Insurance Oversight, a quarter of a million producers are expected to register to sell under federally facilitated exchanges. Gain a competitive edge by ensuring that both your license and knowledge of various regulations and plans is up to date.
As with any government mandate, the result of pending change remains to be seen. Yet the mantra for both producers and carriers remains the same: Prep for the worst and expect the best. After all, the best minds in the insurance business see exchanges as the way insurance will be sold in the future, regardless of PPACA’s fate.
