Healthcare exchanges: Impact on insurance companies, agents and brokers
Healthcare reforms are backed with strong belief due to the objectives they carry, including establishing a Competitive insurance market, Providing free preventive care, Regulating the cost of insurance and Expanding coverage to the uninsured U.S. citizens, etc. Among these, the first one was achieved by proposing the setting up of Healthcare exchanges. As predicted by many, these exchanges would be the key to healthcare reforms. They are expected to generate competition, greater access, choice, portability, and affordability of health insurance products for individuals and small businesses.
What are Healthcare exchanges?
Beginning in 2014, consumers including individuals and small businesses will be able purchase health insurance from the new health insurance exchanges established by the Act. These are created to provide alternate options to purchase health plans…
Essentially, healthcare exchanges are like stock exchange or a farmers’ market. Healthcare exchanges bring in more information and openness but don’t regulate the market. To be precise about their functionality, these exchanges have some specific purposes, including:
- Offering a choice of health plans and focusing on competitive pricing. Providing information to consumers.
- Creating an administrative mechanism for enrollment.
- Moving towards portability of coverage.
- Implementing healthcare reforms proposed in the affordable care act.
Impact of healthcare exchanges on insurance companies
Prima facie, a lot of people in the industry are claiming that the impact on insurance companies will be negative. This is simply because there are many obligations that the insurance companies have to fulfill before they can enlist themselves as sellers on these exchanges. Also because these exchanges will involve stiff competition, the revenue generation of the participating companies will decrease because of decreased prices.
On the positive side, the companies will have a wider access to the markets, which will increase the company value. However, smaller insurance companies might not be able to take advantage of this as it is difficult to lower the prices of health insurance plans.
Impact of healthcare exchange on insurance brokers
With the birth of these exchanges, brokers are expecting significant decrease in their business. Insurance exchanges have information dissemination as one of the core objectives. As the consumers become more educated about how to buy a health insurance plan, the role of a broker is going to lose its importance. Even if the consumers do take help of insurance brokers, it will take the broker a longer time to answer all the questions and doubts that the consumers might have. The commission structure will become more transparent and consumers will be able to decide whether they should directly buy a health insurance plan from the exchange or buy it from a broker (Explore our WebInsure Benefits- the Broker Software Florida).
Overall, smaller insurance brokers are expected to be forced out of business or will be subjected to acquisitions and mergers on a wider scale. However, if the state exchanges are built with some consideration for the brokers, they will be able to leverage their business positively.
Healthcare exchanges propose a bright future for the healthcare reforms. In Massachusetts and Utah, this system is already in place as State-based exchanges, and consumers are taking advantage of the options that are available.
However, there are some questions that are answered in the assumptive mode by these exchanges, including:
- What if the insurance companies do not participate in the exchanges?
- What if the individuals don’t find the offered plans satisfactory?
- What if the exchanges underpay service providers and they stop treating exchange beneficiaries?
All these concerns put a check on the good-value of these exchanges.
Like any new project, the implementation of exchanges would have its positive and negative impact on the insurance carriers and the brokers. However, if the concerns are taken care of, these exchanges remain the key to healthcare overhaul.