Filed Under:Agent Broker, Agency Management

Senate Health Reform Bill Does Not Control Commissions

NU Online News Service, Dec. 21, 1:10 p.m. EST

WASHINGTON--Healthcare reform legislation viewed as more positive to insurance agents than earlier versions cleared a critical hurdle in the Senate early this morning, setting the stage for Senate passage as early as the evening of Christmas Eve.

The key revision, from the standpoint of agents and brokers, of benefit to them came in an amendment unveiled early Saturday that included deletion of a provision that would have required the federal Department of Health and Human Services to regulate broker compensation for products sold in state exchanges.

Officials at the Council of Insurance Agents and Brokers, in an alert to members obtained by National Underwriter, said this and other changes appear to "have significantly improved the legislation."

Additionally, the CIAB said, the cap on total insurer "administrative" expenses has been lowered from 90 percent to 85 percent for the large group market (over 100 lives) and to 80 percent for groups of under 100 lives.

CIAB told its members that, "While we are philosophically opposed to any such price controls, we believe the new percentages are more realistic and should relieve some of the pressure on plans to shortchange marketing of products."

CIAB said in the alert that, "we had been tremendously concerned that 'administrative expenses' as originally defined under the bill as introduced by Sen. Harry Reid, D-Nev., Senate majority leader, "would have included prevention/wellness programs."

Moreover, the association said, "We are pleased that there is now an exclusion for 'any activity that improves health care quality,' which is a big win for wellness initiatives."

However, as noted by America's Health Insurance Plans, a new $70 billion premium tax will be instituted between 2011 and 2019 "that will increase the cost of health care coverage for millions of Americans and fall primarily on small businesses and those who purchase coverage in the individual market."

Specifically, according to Washington Analysis, as changed by the manager's amendment, the tax will affect "nearly all insurers" starting in 2011.

The excise tax will be based on the insurer's share of annual net premiums received. The fee will not be tax deductible and apply to all commercial risk business, Medicare Advantage and Medicaid HMOs.

The excise fee will not affect companies that provide "administrative services fees only" from administering ERISA plans nor apply to certain non-profit insurers with medical loss ratios between 90 and 100 percent, an exemption that supposedly applies to non-profits in Michigan and Nebraska.

In 2011, the fee is expected to collect $2 billion; in 2012, $4 billion; in 2013, $7 billion; in 2014 through 2016, $9 billion; in 2017 and beyond, $10 billion.

The current version of the bill would exempt non-profits from the excise tax that spend more than 92 percent of their premiums on healthcare as well as those that provide guaranteed-issue coverage to people unable to get coverage elsewhere.

As for the so-called "Cadillac tax," starting in 2013, under the bill, all insurers and self-insured companies will be assessed a 40 percent tax on the excess above $9,850 for an individual and $23,000 for a family of four, with a higher threshold for those near-elderly retirees or those having a high-risk job, like policemen, firemen, telephone workers and longshoremen, the analysts said.

AHIP officials also warned that the Senate bill will lead to "more cost shifting to patients with private coverage as providers are forced to make up for hundreds of billions in reduced Medicare payments."

It will also impose new market and rating rules that will increase premiums for individuals and small businesses with coverage today, AHIP officials said.

According to the CIAB alert, other provisions in the manager's amendment increase the surtax on families with $250,000 in income (individuals with $200,000 in income) is raised from .5 to .9 percent.

Also, there is a basic exemption for mutual companies that have at least 40 percent market share in any state. And the cosmetic surgery tax is replaced with a tax on indoor tanning services of 10 percent.

Analysts said that a vote in the U.S. Senate appears set to pass the legislation before Christmas. It will then be reconciled with the House version in January.

The legislation will dramatically alter the current U.S. healthcare system and cover an estimated 30 million currently uninsured people effective 2013.

Two analysts, Ira Loss and Beth Steindecker-Mantz of Washington Analysis, said they doubt that given the fragile coalition holding the bill together in the Senate, "not much"of the House bill will emerge from the House-Senate conference. They believe Congress will finish its work up on the legislation in January.

Otherwise, they said, it is "unlikely" the Senate will amass the 60-votes needed to get the conference bill to a vote.

This story was updated at 2:p.m. EST

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