David Combs has been a health insurance broker in London, Ky., for more than 15 years. When the Affordable Care Act became law, he read it, from cover to cover. Then he sold his agency.
The mainstay of his business had been selling insurance coverage to small companies, and, the way he saw it, here was the government, stepping in and offering to sell it online instead. Combs and many others thought brokers would go the way of travel agents, no longer needed in a do-it-yourself online marketplace.
But he started to think about the law in a new way once he learned that brokers could still earn a commission for selling coverage through the exchange
"I knew there was going to be a massive change in our industry, and anytime there's a massive change, there's opportunity," says Combs. So he started a new agency in 2013.
Some of the states that were most successful in enrolling consumers via the exchanges embraced brokers. In California, 39 percent of people who signed up for a private exchange plan enrolled with a broker; in Kentucky the number reached 44 percent.
Combs' key insight was that many of his small-business clients could do better dropping their small group coverage and helping their workers sign up for individual insurance on the exchange. The law allows companies with fewer than 50 full-time workers not to offer insurance.
Frisch's Big Boy, a bustling franchise diner off the highway in London, is the kind of small business where Combs always sold insurance. The restaurant's policy was available only to full-time workers, and, in the past, it was expensive — costing the company and the workers each $150 a month per person. On top of that, they were facing an 86 percent rate increase in 2014.
Before the federal health law offered new options, few of the restaurant's workers who were eligible to buy insurance policies through Frisch's actually did so. Given the new options of Obamacare, "it didn't make sense for [the restaurant] to continue to offer health insurance," explains Combs. "It was actually a detriment to their employees."
Here's why: Because most of the restaurant's employees were low-income, they would qualify for free or low-cost coverage on Kynect — Kentucky's state health insurance exchange. Switching everybody over to the exchange was win-win-win: cheaper for the restaurant, cheaper for the employees; plus, more people got coverage, including some part-time workers.
"I thought to some degree it was too good to be true, what people were paying," says the franchise diner's co-owner Herman Hatfield. "But it worked out to where a lot of people got better care for less money."
Combs earns a commission of $20 per month for each person he enrolls, including spouses and children. That commission is paid by the insurer and is already built into premiums. Combs enrolled all the employees at Hatfield's London, Ky., diner in just two days.
Before the advent of Obamacare, waitress Mary Gray was one of only 12 people at the restaurant who bought her health insurance — the old, expensive policy – through Frisch's. This year, she enrolled in a silver plan through Kynect that was completely subsidized, so she pays nothing toward her premium. She is one of the 28 employees at Frisch's whom Combs helped enroll in a private Kynect plan; most of the rest of the 60 full- and part-time employees at the London restaurant qualified for Medicaid, while a few had employer-sponsored coverage through a spouse or parent.
Virtually all the small businesses Combs had sold coverage to in the past were eligible to make a transition similar to the one the London diner made. "We're running into an industry as many of our fellow brokers are running out," he says, because instead of signing up small companies, the other brokers are signing up individual people, one at a time. If you take that approach, Combs says, "you'll go broke."
But brokers' roles are not so significant everywhere. In Kentucky, 44 percent of consumers who bought private health plans bought them through brokers; that compares with just 8 percent nationwide, according to a survey from the Kaiser Family Foundation.
In many states, brokers fought against the health law and against navigators (the government workers who help people sign up for Obamacare). But in Kentucky, Kynect's director, Carrie Banahan, set up a special committee for brokers and navigators that got them talking.
"It was contentious at first," Banahan admits. "But once they got to know each other, they built a level of trust and they get along very well."
If brokers want to survive, Combs says, they have to embrace the federal health law, even if they don't like it. "The ones that don't want to get into it and educate themselves about health reform — I think they are going to become kind of a dinosaur fairly soon," he says.
But those brokers who can evolve have a huge opportunity, Combs believes. By December 2014, he expects his new agency to hit $1 million in revenue — the most business he's done in his 15 years as a broker in Kentucky.
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