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Insurance Agents Cheer State Commissioners' Vote on Medical Loss Ratio

INSURANCE JOURNAL

In a move being applauded by insurance agents, a task force of state insurance regulators has recommended that states support legislation to protect agent and broker commissions from the expense cap imposed on health insurers by the new federal healthcare law’s medical loss ratio (MLR).

A health insurance advisors task force of the National Association of Insurance Commissioners (NAIC) voted to back H.R. 1206, the Professional Health Insurance Advisors Act of 2011, which was introduced in Congress by Rep. Mike Rogers, R-Mich.

Under the federal healthcare law, the Patient Protection and Affordable Care Act, insurers must spend at least 80 percent of premiums on medical costs and are limited only 20 percent for profits, marketing and administration, a segment that now includes agent and broker fees. If insurers spend more than 20 percent on non-medical expenses, they must refund the extra to policyholders.

The task force is now recommending that the full NAIC put its weight behind the Rogers bill to remove agent and broker fees from the MLR’s administrative calculation. That would be a shift in position for the NAIC, which last year supported a formula that included agent and broker fees in the administrative portion of the MLR.

The panel had postponed an endorsement back in March in order to collect more information.

However, agents and broker have balked at having their income placed under the MLR’s administrative formula, arguing that insurers will look to cut their fees as a way to stay in compliance and, in fact, have already begun cutting.

A survey by the National Association of Financial Advisors (NAIF) found that 75 percent of insurance brokers have seen their fees decrease since MLR was announced.

Agents fear they will be marginalized under the health insurance system if the formula is not changed.

“We are very encouraged by the NAIC Task Force’s overwhelming support for excluding agent commissions from the MLR calculations,” said Charles Symington, senior vice president of government affairs, Independent Insurance Agents and Brokers of America (the Big I). ”This fix is desperately needed to ensure consumers can continue to rely on trusted health care advisors.”

Symington said he hopes both Congress and Health and Human Services (HHS) will build off the momentum generated by this action to “quickly come to either a legislative or regulatory solution.”

“This action is good news for America’s health insurance consumers and good news for the Main Street independent insurance agents that consumers rely on,” said Leonard C. Brevik, executive vice president of the National Association of Professional Insurance Agents (PIA).

Some consumer groups, however, do not want to see the MLR formula changed.

Consumer Watchdog condemned the move and called on the full NAIC to reject the plan. The group said the legislation would preserve broker sales commissions and benefit the bottom line of insurance companies at the expense of consumers.

“This plan is a broker pay bonus and insurance industry profit boost that will come straight from the pockets of consumers and taxpayers. The insurance regulators who voted for this plan sold consumers in their states down the river by endorsing higher health insurance premiums and millions in lost rebates to benefit their friends in the insurance industry,” said Carmen Balber, Washington director for Consumer Watchdog.

The full NAIC has not yet set a date to consider the task force’s recommendation.