In the aftermath of the U.S. Supreme Court’s decision upholding the constitutionality of the Patient Protection and Affordable Care Act (PPACA), independent insurance agents are more than just a little concerned -- they are in fear of losing their jobs.

As the vice president/general counsel of the Florida Association of Insurance Agents, I hear from agents every day, and most express trepidation regarding the fate of independent health insurance agents.

Adding to their concerns, Gov. Rick Scott recently announced that Florida will not implement a state-based health insurance exchange. Although this may sound good to PPACA opponents in theory, it does little to provide certainty or comfort to the independent insurance agents facing the possibility of losing a significant source of revenue.

To put things in perspective, the first blow to insurance agents came in the form of a medical loss ratio (MLR) imposed on insurers under the PPACA, effective Jan. 1, 2011. It requires that health insurers spend at least 80 percent in the individual and small group markets and 85 percent in the large group markets for every dollar in premiums collected on health care/medical expenses.

That leaves 20 percent and 15 percent, respectively, for administrative costs, which specifically include agent compensation. Needless to say, health insurers have drastically reduced compensation paid to their agents and, as a result, many agents have left the business or laid off staff … at a time when consumers have more questions than ever.

The second blow to health insurance agents will now likely manifest itself in the form of a federal health insurance exchange. Numerous articles have covered Gov. Scott’s refusal to implement several of the PPACA provisions, including the state-based exchange provision. Most don’t explain the consequence of a state not establishing its own exchange.

Under the PPACA, states have the option of creating a state-based exchange or establishing a state partnership exchange in which the federal government operates the exchange but the state retains some regulatory functions. In the absence of a state implementing either of those two options, the federal government will step in and require the state to use the exchange established and managed completely by the federal government, without consideration of the local marketplace and best interests of the state residents.

These exchanges are intended to provide access to health insurance and subsidies for small businesses and low- to moderate-income individuals. They provide a marketplace where these individuals and small businesses can shop for plans, which must include minimum benefits packages that insurers are required to offer under the law. So, where do insurance agents fit into the picture?

Florida law requires that a health insurance policy be purchased through a licensed insurance agent, whether it is an agent who works directly for an insurance company or as an independent. Yet, under the PPACA, the “navigators” who assist and guide businesses and individuals through the exchange and the selection of a health plan are not required to be licensed insurance agents.

This could dramatically decrease the number of health insurance policies sold by licensed agents, even though no one is better qualified than an independent insurance agent to help a business or individual sift through and compare multiple health insurance plans and assist with administrative service and claims.

If the state of Florida were to set up its own exchange, I feel confident that the Legislature and the regulators would attempt to limit the encroachment of navigators and would endeavor to protect the role of licensed insurance agents, consistent with Florida law.

In doing so, the interests of consumers would be protected by affording them expert advice and service regarding health insurance policies.

Florida politicians should be mindful of the consequences of choosing the federal exchange over creating our own state-based exchange and consider what’s best for Floridians, both individuals and businesses. Federal health care reform is here, whether we like it or not, and a state-based exchange will best serve the interests of Florida’s insurance consumers and independent insurance agents, most of whom are small businesses employing many individuals in our local communities.


As vice president and general counsel of Florida Association of Insurance Agents, Laura Boyd Pearce is FAIA's onsite attorney and lobbyist representing FAIA before the legislative, executive, and judicial branches of Florida government. She holds degrees from Stetson University and the University of Florida College of Law.