NU Online News Service, Dec. 30, 10:52 a.m. EST

WASHINGTON–Insurance agents and brokers should focus on the medical loss ratio in the healthcare reform legislation because it will determine their future commissions, a healthcare law and policy expert says.

Bruce Fried, a partner in the Washington, D.C. office of Sonnenschein Nath & Rosenthal LLP, said the Senate version of the bill sets limits on the medical loss ratio. That in turn means insures will have to reduce administrative costs and one place they will do that is by squeezing commissions.

"The final provisions dealing with MLR are going to be critical for agents and brokers," observed Mr. Fried. "That is what they should focus on."

Effective in 2010, the Senate bill sets up an 80 percent medial loss ratio for individual and small group plans and an 85 percent medial loss ratio for large group plans. Medical loss ratios are the percentage of premium spent on actual patient care services.

Mr. Fried said the impact of this bill will be far-reaching, but it will ultimately be beneficial for underwriters, agents and brokers because it will offer opportunities to sell insurance for up to 33 million new customers.

At the same time, he said, introduction of healthcare exchanges through the legislation will not necessarily be a negative for agents and brokers.

"Nobody knows how many people will obtain coverage through these exchanges," he said.

He believes the successful competitors are going to see this as opportunity as well as chaos and look for ways to take advantage of new opportunities.

"There are millions of Americans who are going to have coverage for the first time, and that is a new market for brokers and agents as it is for everyone else," he said.

Special Reports /

Med Reform Loss Ratio Could Affect Agent Commissions

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