Insurance Brokers Vital for Cheaper Health Coverage

By Kathryn Mayer

Brokers who need a self-esteem boost after lingering doubts about their future and their overall value can look to a new report for some validation.

Research from the University of Minnesota finds that brokers are associated with more and cheaper health coverage.

“Our central finding is that small firms in more competitive agent/broker markets are more likely to offer health insurance to their active employees,” researchers wrote in the report, posted as a working paper by the National Bureau of Economic Research.

“We also find that increased agent/broker competition is associated with lower premiums. Finally, we find that premiums have lower variance (they are less dispersed) in markets with more agent/broker competition.”

The report comes just as brokers are expressing fear over their value. A recent Aflac survey found that nearly half of brokers aren’t confident in their future in the industry and are considering quitting. That report also found that almost one-third of brokers said they’re concerned about remaining relevant to clients.

The self-doubt is in large part due to the Patient Protection and Affordable Care Act, a law that threatens brokers’ commissions. Additionally, many brokers are angered by PPACA’s navigator system, because those hired as navigators don't have to be trained agents or brokers and cannot be paid by carriers.

But despite the fact that brokers increasingly feel that clients don’t need them, the new research —headed up by economist Pinar Karaca-Mandic — found the opposite is true.

The researchers said the greater availability of brokers is key to consumers and employees spending less on premiums.

Karaca-Mandic found that small firms were about 20 percent more likely to offer health coverage in counties with the most brokers serving small firms than in counties with the least. In counties with the fewest brokers, the average annual premium for a single employee was $5,173. In counties with the most brokers, the annual premium was $4,495 — 13 percent less.

The report was funded by a grant from the federal Agency for Healthcare Research and Quality.

Researchers said the study was the first of its kind.

“Despite their direct and indirect influence on complex health insurance decisions, there is no empirical evidence about the effects of agent/broker market structure on access to and affordability of health insurance,” researchers wrote about why they conducted the study.

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