Emily and Scott Bailey's lives changed forever in January: the adoption lawyer they’d been working with for the past year had located a newborn for them in Las Vegas.
After meeting baby Oliver, Emily, 40 and her school teacher husband Scott, 48, learned they were not allowed to bring him home to Los Angeles without first buying him health insurance.
Because it was winter break, the human relations department at Scott’s school district was closed. So Emily tried contacting insurance carriers on her own.
But 2015's open enrollment period was in full swing and she couldn’t get through to anyone, she says. Finally, Emily called health insurance broker Alison Gordon.
"In 24 hours she got us coverage," Emily says. "And she also got us more affordable coverage than what would have been provided through my husband’s group plan."
Gordon says she was able to expedite the process because "I reached out to my contacts at the insurance company and I explained the situation."
The nation's half million brokers are an integral part of the health insurance industry, says Dede Kennedy-Simington, president of the Los Angeles Association of Health Underwriters.
"We know the language, we know the people at the carriers, we know the structure and how to get things accomplished - simply," she says.
But since passage of the Affordable Care Act (ACA), a growing number of brokers have hit rough financial times. A 2014 Aflac workforce report for brokers found 49 percent of those surveyed have considered or are considering leaving the business entirely, and another 67 percent report "many of their peers have left the business in the past year."
No more health care clients
Susie Fabrocini, owner of Reseda-based Great Life Financials, is one of the brokers making a change.
"I won’t be seeking more health care clients," she says. "I’m going to be focusing on retirement planning and things like that."
Fabrocini says selling individual and family health insurance plans is no longer a sustainable business under changes wrought by the Affordable Care Act, adding that her situation is even more difficult because her customers need a lot more of her help these days.
"I get them signed up but then also I get the calls when they’re having problems or they can’t figure out how to navigate the system," Fabrocini says.
Fabrocini isn't paid for providing post-enrollment advice, nor was Alison Gordon paid for her behind-the-scenes efforts on behalf of the Baileys. Industry regulations don't allow that. Instead, brokers earn their income through sales commissions that insurance carriers pay out of customer premiums. And those commissions have been shrinking, according to industry officials.
The 80 percent rule
Industry leaders trace the declining commissions to the Affordable Care Act's requirement that insurance companies spend at least 80 percent of their income from insurance premiums on medical care, rather than on administrative expenses.
The rule is designed to protect against wasteful spending of consumers' premium dollars. The only problem, say brokers, is that under the federal health law, broker commissions are now considered part of a company's overhead.
That change has resulted in carriers cutting commissions substantially to stay within their overhead budgets, says UCLA health policy expert Dylan Roby.
In some cases, brokers say, commissions have been cut in half or more.
"So it stands to reason that a health insurance agent would find selling individual insurance less lucrative than they used to," Roby says.
"It's made us have to rethink how we do business," says Linda Rose Koehler, a regional vice-president for the National Association of Health Underwriters (NAHU).
For broker John Beyer, the changes brought on by the ACA prompted him to sell his Torrance brokerage firm. Today, the 45-year industry veteran works as a consultant at the company. And while he still services his former accounts, Beyer says he and the firm no longer sell individual and family health insurance.
"When you calculate what we were making and you calculate what it is currently and you start to calculate what your overhead is...it just didn't make a lot of sense," he says. ACA changed a lot of things. Reduced our income, added responsibilities and requires more work on each account.
With lower commissions, staff layoffs
While smaller brokers like Fabrocini are hardest hit, many larger independent brokerage firms are also feeling the commission squeeze. David Benson, a 32-year-veteran of the industry, is president of DCB Insurance in El Segundo.
"Our office has staff people that do nothing but customer service 8 hours a day and our phones are ringing constantly," says Benson. "When commission levels are reduced, we’re not in a position to keep staff people. We have to let them go."
To buttress the broker work force, the Affordable Care Act created certified enrollment counselors to help people buy insurance. But their role is limited. First, they can only sell insurance through a government exchange, like Covered California; there's a whole spectrum of individual and family insurance available outside of the exchange that they can't sell. And enrollment counselors are not trained to do more than help consumers sign up for a plan.
By contrast, brokers, Roby says, are playing a key part in recruiting consumers - especially non-English speakers and younger people who are needed to balance the risk pool. Brokers have signed up about 40 percent of all of those who have bought plans through Covered California, while enrollment agents have signed up just ten percent, according to the exchange.
"I think a decrease in health insurance agents could actually undermine covered California’s ability to target certain populations that have been hard to reach," Roby says.
Industry leaders say keeping many brokers in the individual health market will likely require a change in the Affordable Care Act. To that end, they’re supporting a bipartisan measure in Congress that would remove broker payments from an insurance company’s overhead. It’s a simple change, they say, that would both help consumers and preserve thousands of industry jobs.