While things are currently in turmoil, health care reform is bound to happen in one form or another, sooner or later. If reform does not happen on the federal level, it may happen in state legislatures.

Whatever form it takes will likely lead to significant changes in the major medical marketplace - not all of which will good for advisers. Rather than dreading the inevitable, though, forward-thinking advisers such as Russ Childers, owner of Russ Childers Insurance and Investments in Americus, Ga., are focusing on the opportunities that reform can present.

Virtually any form of health care reform, notes Childers, is likely to reduce the commissions he receives from selling and servicing major medical plans. "We'll get somewhat lower commissions, and we'll have to work harder to keep them," says Childers, who is also president of the National Association of Health Underwriters.

However, to quote Don Draper of TV's "Mad Men," "Change isn't good or bad, it just is." Health care reform will transform the marketplace, and advisers have to accept that, says Thomas Minkler, president of Clark-Mortenson Agency in Keene, N.H. "It is what it is. We have to deal with it and move on," he says.

Advisers may be unhappy with whatever version of health care reform ultimately emerges, but need to accept it, prepare accordingly, and seek out new income streams.

Reform will lead to a whole new way of doing business and a whole new regulatory system to abide by, agrees Joseph Wall, senior director of government affairs for Independent Insurance Agents & Brokers of America in Washington, D.C. Advisers who accept the changes and find new ways to tease out income from the system will evolve. Those that cannot adapt will die out.

Health insurance exchanges

No matter what form reform eventually takes, there will be opportunities for advisers willing and able to change their business models. One route to new income for advisers could be the health insurance exchanges that are part of ObamaCare.

If they survive, says Wall, the exchanges would be among the biggest changes to the current system and would serve as the new gateway for selling insurance to individuals as well as to small groups.

Teasing income out of the exchanges would be critical for advisers working in the small group market due to their impact on that space. Individuals and small groups would have access to insurance through the exchanges, so it would change the composition of the small group, says Wall, adding that the definition of small group would probably increase from two to 100, up from the current two to 50.

Larger ERISA plans would probably remain stable, but smaller plans might get sucked up into the exchanges, agrees Joel Kopperud, director of government affairs for the Council of Insurance Agents & Brokers.

"It would be interesting to see where employers with less than 100 employees go," says Minkler. Smaller employers, he says, would need to consider whether or not it makes sense for them to stay with their plans or just pay a penalty to drop their workers into the exchanges. While many smaller employers may decide to drop insurance, others would keep it because providing insurance does create a competitive edge for smaller employers.

The initial confusion caused by the availability of the exchanges, note Childers and Minkler, might be good for business. Advisers can play a role with their smaller clients in consulting with them to make the determination to keep their current plans or move employees to the exchanges.

"Human resource managers will still look for experts to help them navigate the system," says Kopperud. Additionally, there may still be a role for brokers to sell plans through the exchanges, he says, depending on whether the exchanges recreate a broker-type role.

Furthermore, states may turn to advisers to help them run the exchanges, says Dennis Donahue, managing director and national practice leader for employee benefits at Wells Fargo Insurance Services in Chicago. States will have little appetite to run the exchanges themselves given current deficits, he says. If it is permissible for advisers to make profits, states will recognize that the best people to help run the exchanges will be advisers with expertise in the major medical field.

State-created health care purchasing co-ops, says Kopperud, could also create opportunities for agents and brokers. States and the federal government may turn to advisers to help set up the purchasing co-ops because advisers have expertise and knowledge of the marketplace.

Mandates

Mandates could provide another avenue to new income streams, particularly for advisers willing to work in the individual market. If an individual mandate survives, it will definitely provide new opportunities for advisers, says Wall.

By 2019 there could be 30 million additional people who will need insurance, so there are real growth opportunities, says Minkler. Additionally, notes Wall, the employer mandate is weak, and many smaller employers may dump workers into the marketplace.

Mandates requiring employers to provide health insurance could lead to new employer plan growth as well. Small employers with fewer than 50 employees are technically exempted, says Childers, but companies in the 20-to-25 employee range could be swept up into the mandate.

While most employers in this size range already have insurance, he says, many in the hospitality, construction and fast food industries do not. There may be opportunities there, unless these employers change their employment practices to avoid the mandate.

Additionally, notes Childers, if health care plans become more standardized as a result of reform it could create opportunities to sell other benefits to employers. If every employer looks the same vis-à-vis health care benefits, he says, they will look to offering other benefits to attract and retain workers so that they can differentiate themselves.

Advisory role is key

However, the biggest opportunity that health care reform would present to advisers lies in leveraging their advisory role. New legislation always brings confusion, says Childers, and employers will need professionals to sort through the new regulatory morass.

Health care is one-sixth of the economy, and everyone will be looking for advice, agrees Wall, who notes that the last year's transition to digital TV caused heartache around the country. "Now they're tweaking the health care system," he says, "and that will cause a lot of heartache as well." There will be lots of questions, and lots of education will be needed.

There would be a lengthy period of adjustment as employers struggle to comply with new rules and regulations - an opportunity for advisers to build their businesses, says Childers, who has been in business for over 27 years and works with 35 to 45 groups. Advisers can prove their value to current clients by helping them through the transition, as well as use their expertise to pick up new business.

Indeed, recent research seems to indicate that employers are expecting to turn to their major medical advisers to help them sort out any new legislation that might be enacted.

According to a 2009 survey by MetLife, 83% of surveyed employers report paying close attention to health care reform legislative efforts. Employers were looking to their brokers to help them track the legislation, with 57% of employers with 500 or more employees reporting they turned to their benefits broker or adviser for that information.

The most obvious opportunity, says Childers, is to visit with current and prospective clients and share the details of how they would be affected. Talk to companies about the changes, he says, and let them know you're the best person to advise them about the changes and offer a competitive plan.

Helping clients stay in compliance with new rules also presents huge opportunities, says Kopperud, citing the amount of work brought in by the recent COBRA subsidy rules.

"Reform would create a confusing time for business. They will need professional advice to steer them through the process - and it will be a continual process because it's a phase-in," says Minkler.

It's likely that any new requirements will be staggered, so one area where advice will be needed, notes Wall, is when different rules come into effect. For example, under the health care reform bills passed by the House and Senate, some requirements would take effect as soon as six months after enactment, while others would not go into effect until 2015.

Additionally, employers in the small group market might find that the plan they currently offer does not qualify under those requirements, says Wall, unless they are grandfathered. So they would be looking for advice as to how to proceed.

Ultimately, the fallout from health care reform may be that the major medical market will become more consultative and less sales oriented, says Minkler. "And you're going to have to adapt your business to deal with that," he says.

Advisers working in the major medical space will likely see themselves moving from being more sellers than advisers to being more advisers than sellers. Income will be generated more from giving advice than selling products.

Additionally, notes Childers, advisers who formerly specialized in certain segments of the major medical market may have to become more diversified in the future. For example, those who specialized in small group health may find that they need to broaden their horizons in order to grow their business.

Health care spending proposals in the FY 2011 federal budget

President Barack Obama's $3.8 trillion federal budget request for fiscal year 2011 includes $81.3 billion for the Department of Health and Human Services - $1.7 billion more than Congress approved for HHS in fiscal year 2010. The additional funds are intended to lay the groundwork for health care reform, according to the president. They will be used to improve health care information technology, research the effectiveness of treatments, improve access to cheaper generic drugs and make changes to Medicare payments.

Highlights of Obama's health care funding requests include:

•  $40 million to expand prevention and wellness programs
•  $110 million to strengthen health care information technology policy, coordination and research activities
•  $286 million for research that compares the effectiveness of different medical options; building on the expansion of this research begun under the American Recovery and Reinvestment Act* $2.5 billion to support health centers so they can expand coverage to 2 million additional patients and build approximately 25 new health centers
•  $25.5 billion for additional federal Medicaid assistance to help states maintain their Medicaid programs
•  $371 billion over 10 years to prevent Medicare reimbursement cuts affecting physicians
•  $32.1 billion to support biomedical research at the National Institutes of Health, including more than $6 billion for cancer research
•  $169 million to increase the number of primary care physicians in underserved areas
•  More than $400 million to develop countermeasures against chemical, biological, radiological and nuclear threats

What's the future of health care reform?

Health care reform has been on the top of the legislative agenda for both the House and the Senate since the spring of 2009, and at press time it was still unclear what the ultimate result will be.

While the election of Republican Scott Brown in Massachusetts to Ted Kennedy

Almost all the big associations representing advisers, including NAHU, the Big I and CIAB, have been working with Congress in trying to shape the pending legislation. The current version of the legislation is not nearly as offensive to brokers and advisers as it was six months ago, said Joel Kopperud, director of government affairs for CIAB, in early January.

But, in the end, many are against what has emerged. In general, the Big I opposed both the House and Senate bills because they failed to achieve real reform, according to Joseph Wall, senior director of government affairs for the Big I.