PPACA: What Now? And What About Ancillaries?

Now that the initial dust has settled on the first round of the Patient Protection and Affordable Care Act (PPACA) enrollment, and the “who won and lost” discussions have gotten their requisite belaboring by the punditry, the real answers (and additional questions begged by those answers) may lie in the more complicated details:

• How many have enrolled? The Obama administration tracks plans purchased on the Federal and 14 State exchanges to arrive at its 7.5 million figure. That figure is separate from Medicaid enrollment and enrollment in private plans outside the exchanges (i.e., buying directly from carriers), with subsidy eligibility perhaps creating steerage to (if subsidized), or away from (if not), the exchanges.

• Digging deeper, “enrolled” is different than “covered.” This is a distinction particularly important to an agent and an agent’s carriers, with industry estimates ranging from 10 percent to 20 percent of enrollees possibly not having paid the first month’s premium for coverage to become effective.

• Beyond “coverage,” what is the net gain or loss for agents and carriers? Cancellations due to lack of compliance with PPACA, changes in premium driven by differences in benefits covered and individual cost-sharing, etc. may drive material changes in agents’ and carriers’ net premium. On the back-end, carriers’ financial results will shape the future rating environment and the future of expense structures, including agent commission levels and structure.

Beyond “today’s PPACA news,” what questions are emerging for tomorrow’s benefit environment?

• Distraction and Inertia: Has the “PPACA debate and obsession” distracted groups and individuals from additional ancillary needs because subsidies/exchanges/politics are not easily absorbed? Inertia in the ancillary product space appears to have been an ongoing PPACA challenge. Unless the renewal is beyond trend or otherwise beyond the bounds expected, agents may be particularly challenged to get in doors with an ancillary offering. Beyond the inertia, timetables are being increasingly aligned with health insurance, so if the agent isn’t ready to sell when the health insurance closes, that door is often closed for a year.

• Nature of Sale and Exchanges and Agent’s Role: The potential evolution driven by PPACA may translate to fundamental changes in other markets as well. Will PPACA’s “individual product” nature be a catalyst for changing the emphasis in the ancillary product market, from delivery via the group/worksite environment to delivery via the individual/exchange market? If so, what is the time horizon for such evolution? One year? Three to five years? Or never? Do consumers expect subsidized coverage in the ancillary space, like that for Health? And without it, does the individual/exchange market for ancillaries face an uphill battle to gain sales traction? And across this spectrum of questions, where does the agent fit in? As an exchange navigator, does partnering with a public (government) payer offer promise, development, and/or fulfillment?

• Removed Restrictions and Expectations: PPACA’s removal of restrictions may reset consumer expectations for no limits and no restrictions on benefits or their use. Part of the cost-savings and value associated with ancillary products include plan design elements that mitigate costs via coverage restrictions, so there’s “give and take” between “underwriting expectations” and “cost expectations.” The opportunity that agents have to serve clients in expectation-setting begs the question “What is the agents’ role going forward in the ancillary space?” And if that role is expanded or more nuanced, what compensation makes sense?