Benefits brokers that provide voluntary benefits, wellness program administration and analytics likely will do well in the post-health care reform environment, experts say.

But those that have done little more than placing employers' health insurance business likely will go the way of the dinosaurs, many say.

“It will be a Darwinian landscape. Some will evolve and survive; some will literally disappear,” said Michael Turpin, executive vp at USI Insurance Services Inc. in Briarcliff Manor, N.Y. “Those that can provide the greatest value, serving as an advocate, consultant and adviser, will thrive; while those who were merely sitting back and collecting commissions will have to seek employment elsewhere.”

“Our business just got a lot more complicated,” said J. Michael Brewer, president of Lockton Benefit Group, a unit of Lockton Cos. L.L.C. in Kansas City, Mo. “There are going to be brokers at risk because they're going to be under-resourced and unable to provide the depth and breadth of services required. To be successful, you're going to have to gear up, resource up and be prepared to answer the thousands of questions that employers are going to have.”

“There has never been any more evidence of the value equation for brokers in helping their clients administer benefit plans in this environment,” said Joel Wood, senior vp of government affairs at the Council of Insurance Agents & Brokers in Washington.

In fact, the CIAB, which represents the top 1% of U.S. insurance producers, has seen a surge in the number of its members developing communications, hosting webinars and even films on YouTube to educate their employer clients about how health care reform will affect their plans as the federal mandate phases in.

“Brokers see this as a five- to 10-year planning exercise,” Mr. Wood said.

For example, brokers initially will help employers determine whether their plans are “grandfathered,” or remain unchanged, and avoid being subject to some health care requirements, such as covering preventive care at 100%, at least temporarily.

However, as time goes by and health care costs continue to rise, employers will call on their brokers to help them decide which changes to make to keep coverage affordable, Mr. Wood said.

“There is a barrage of guidance that brokers are having to give employers about what will work and what won't work, and how to manage their costs in this environment, and how to transition into this new world,” Mr. Wood said. “It's challenging; it's exhilarating; it's frustrating. But as long as that value proposition is playing out, and there is more reliance (by employers) on consultants and brokers, our members will continue to thrive.”

“Not that we don't have a great deal of anxiety. So much of this is knocking on the door of federal price controls. You've got the boot of the federal government on the necks of insurers,” said Mr. Wood in referring to one aspect of the federal law that will require insurers to spend a certain percentage of premiums on medical care, known as minimum medical loss ratios.

He and others expect this to limit the amount of money insurers will have to pay in commissions, particularly in the small-group and individual markets, where medical loss ratios have been set at 80%.

“We anticipate that the new MLR requirements will put a squeeze on available capital that carriers can pay to brokers,” said John Prible, vp of federal government affairs at the Independent Insurance Agents & Brokers of America in Washington, a trade group that represents mainly small insurance producers.

As commissions shrink for placing health benefits, some brokers may look to other coverage to supplement their income, said Shawn Jenkins, president and CEO of Benefitfocus.com Inc., a web-based technology vendor in Charleston, S.C., that provides services to brokers, consultants and employers.

“If you were a broker or an agency and your primary income was health insurance commissions, you are now looking for supplemental sources of income,” Mr. Jenkins said. “The primary theme on that side is to add voluntary or supplemental benefits,” such as disability, life and long-term care insurance.

Mr. Jenkins said employers will welcome brokers that have the ability to offer employee-pay-all benefits as employers are forced to cut the core health benefit package they primarily finance.

“Employers are under economic pressure, but they don't want to be perceived as cutting benefits. The strange twist of fate that could help brokers is that employers are open to offering these voluntary benefits to offset any medical benefit cuts,” he said.

The IIABA's Mr. Prible sees opportunities for brokers that can help employers implement wellness incentives included in health care reform. The law allows employers to offer incentives as high as 30% of the cost of individual coverage to encourage employees to take better care of their health.

However, he acknowledged that many small brokers may not have the resources necessary to provide this service.

“The members see some opportunities in the wellness arena, but I'm not sure they've begun to explore how to go about accessing those opportunities,” he said.

Benefitfocus' Mr. Jenkins also expects brokers that can help employers analyze their claims data to contain costs and direct disease management and wellness programs to fare well in the post-reform environment.

“The job of a broker has always been to help employers pick the right insurance and model it out. To the extent that they can look for ways to provide deeper value around analytics and help employers use their claims history to design better plans” will separate those brokers that survive from those that do not. “They have to be more like consultants than just brokers.”

Owen Wingate, president of Wingate Insurance Group Inc. in Ponte Vedra Beach, Fla., is banking on his brokerage's ability to provide full-service benefits administration, including automated enrollment.

“With the reform bill mandating coverage, the reporting requirements (for employers) are going to be unbelievable. The employers are going to be looking to the brokers for this service,” Mr. Wingate said.

As part of its health care reform practice, Lockton has developed a tool to help employers model the effect of dropping coverage and paying the $2,000 per employee penalty under health care reform law, Mr. Brewer said.

“If you consider the financial impact to the employer, losing the tax advantage and the increased taxation on employees, it's not really a slam-dunk decision,” Mr. Brewer said. Moreover, the premiums paid by employees for coverage in an employer-sponsored health plan are paid on a pretax basis, thereby reducing the amount of income subject to taxation.

USI has a calculator that enables employers to compare various scenarios including alternative plan designs, Mr. Turpin said.

“Many employers may find they are covering more than the minimum required by law. Why not cut the benefits and use the savings to finance a wellness program that pays rewards?” he suggested.

Of course, such a change could cost an employer its grandfathered status under the law, something it also could lose for substantially increasing copayments or coinsurance, or even changing insurers.