The National Association of Insurance Commissioners approvedregulations for implementing medical loss ratio provisions of thenew health care reform law and vowed to continue to work to resolveconcerns agents and brokers have regarding the rules impactingtheir compensation.

At the close of the annual meeting in Orlando last Thursday, theNAIC decided against moving to exempt agents' commissions from theMLR formula in the MLR blank it approved for delivery to theDepartment of Health and Human Services.

MLR rules, under the PatientProtection and Affordable Care Act, require individual andsmall-market group health insurers to spend 80 percent of theirpremiums on patient care, and large group insurers to spend 85percent.

Producer groups fear that the rules will add to the pressure oncarriers to reduce commissions.

If an insurer fails to spend the required amount under the MLR,they are required to pay rebates beginning plan year Jan. 1.

A state may have a higher MLR requirement and its own rebateprogram "as long as it does not prevent the application of thefederal program," according to a summary of the regulation.

The MLR for plan years 2011 and 2012 will be calculated usingthe experience of those years. The 2013 MLR will be calculatedusing a three-year average, including the previous two years.

The regulation establishing a uniform definition for MLR wasapproved on a voice vote before the NAIC's joint executivecommittee last Thursday morning.

"We all have an important decision before us," said NAICPresident Jane L. Cline, insurance commissioner for West Virginia,prior to the vote, noting the months of deliberation and work thatwent into developing the rules.

Commenting on the creation of a carve-out for agent commissionaffecting the MLR, Commissioner Cline said an amendment on thatwould conflict with proposals already submitted to HHS and thatthere was uncertainty about whether the body had the authority todo that.

She said the NAIC has sent a letter of support to HHSunderscoring the important role agents and brokers play in the saleof health insurance and educating policyholders.

"We are extremely committed to working with the agent communityas we work to find a resolution. We all recognize the importance ofthe agent community to advise consumers and help them make informeddecisions," she said.

During a press conference held after the vote, CommissionerCline said the MLR rules will now go to HHS for certification,which is expected to happen next week.

There has been no indication that HHS has raised any objectionto the rules the NAIC passed, regulators attending the newsconference said.

Although the commissioners tabled a resolution that would haveencouraged the HHS to allow special considerations for agents inany MLR, the NAIC did move to create a subgroup of its executivecommittee to work with HHS to accommodate producer compensation inthe MLR. It acted at the request of Ohio Commissioner Mary JoHudson and Florida Commissioner Kevin McCarty.

In seeking support for her proposal, Commissioner Hudson saidthe NAIC has received assurances from HHS that they will begindiscussions on this issue "right away."

The resolution that was tabled by the full commissioners in lastweek's plenary session had been agreed to a week earlier by theNAIC's Health Insurance and Managed Care Committee aresolution.

In the resolution, drafters stated: "As important consumerprotections and assistance programs are implemented over the nextfour years, and as insurance markets evolve during the transitionto Exchanges, the role of insurance producers (agents and brokers)will be especially important.

"We encourage HHS to recognize the essential role served byproducers and accommodate producer compensation arrangements in anyMLR regulation promulgated," the resolution continued.

During the press conference after the plenary session, KansasInsurance Commissioner Sandy Praeger, who headed the healthinsurance committee, said the NAIC has been responsive toproducers' concerns, establishing a working group with HHS to workon their concerns.

When asked what impact the MLR will have on agent commissions,Commissioner Praeger said it is not certain what, if any impactthere may be. Like other aspects of the health reform initiative,it is a work in progress, she said. But it is an issue of concernto agents and needs to be addressed.

"It is very much a fluid process," she said, adding that "no onewants to see a disruption in the marketplace."

Nicole Allen, senior vice president of strategic resources forthe Council of Insurance Agents & Brokers, said the CIAB wasdisappointed that the amendment to exclude producer commissionsfrom the MLR was not offered.

"We very much appreciate the NAIC's continued support of theproducer's role in the health insurance marketplace," Ms. Allenadded. "We thank the NAIC leadership for its commitment to workingwith HHS to find an accommodation in the MLR formula for producercompensation. We look forward to working with the NAIC as theydiscuss this important issue with HHS, and to preserving ourmembers' role in the markets," she said.

Speaking at the NAIC press conference, Ms. Praeger alsoaddressed the effects of the new rules on companies. While largegroup insurers are expected to "some stringent requirements," sheacknowledged that individual and small groups may have somedifficulty.