This week for Fall Through the Cracks Friday we delve into the recent Supreme Court ruling on healthcare. One angle of the law that hasn’t been discussed in-depth is the impact the ruling will have on insurance agents. In a recent article on Forbes.com the author looks at how agents will be impacted by the law, focusing on the mandatory 80% of collected premiums that insurers must spend on actual health care. Such a high percentage leaves very little room for commissions to agents, creating a potentially difficult market in which to do business.
Another area of the law that could negatively impact agents is the introduction of healthcare exchanges. From the article:
These exchanges are not yet up and running but it is easy to picture them to be akin to Amazon.com (AMZN) by necessity and by law, insurance companies will have to display their products in easy to understand and easy to compare formats. There will be a huge migration of business from traditional healthcare insurance agents and brokers to the exchanges.
In some ways, the migration will be similar to the migration of retail from the likes of Best Buy (BBY), Barnes & Noble (BKS), and Borders to Amazon.com. At least in retail there are numerous good reasons for the masses to go to the brick and mortar stores. With regard to health insurance the argument for procurement through agents is very weak. Some consumers may continue to use agents simply because they are creatures of habits.
Of course the actual impact remains to be seen.