The failure of the National Assn. of Insurance Commissioners (NAIC) to support the recommendation to the Dept. of Health and Human Services (HHS) that agent compensation be removed from healthcare medical loss ratio (MLR) calculations has been followed by reports of health insurers cutting producer compensation.
The Washington, D.C., newspaper Politico, quoting documents it has obtained, reports that pay for health insurance brokers could be slashed by more than 50 percent in some cases because of new health reform rules. It cites documents from only two insurers, but PIA has received a number of member calls advising us of the same thing, and across many more than two carriers.
Healthcare reform legislation passed by the Obama administration last year stipulates that for individual health insurance policies, 80 percent of premiums must be spent on medical care and quality improvement activities, with administrative costs limited to a maximum of 20 percent. The cap for group health plans is 85/15 percent.
The NAIC’s Executive/Plenary Committee approved a task force formed to ensure that licensed agents and brokers are fairly compensated for the services they provide in the wake of healthcare reform. The formation of this task force came after agents complained that the NAIC had failed to put to a vote a proposal to exclude producer compensation from MLR calculations during an NAIC meeting in August 2010. That proposal garnered support from 14 state insurance regulators.
But the proposal was never put to a vote. The NAIC said that it "lacked the authority" to make such a recommendation. A similar rationale was then cited by the HHS when it accepted the NAIC’s overall recommendations and issued its interim regulation.
Nonetheless, the NAIC evaded an opportunity to protect agents’ interests when it submitted its recommendations without an amendment that would have excluded agent compensation from MLR calculations—the same agents and brokers it said afterward are "indispensable" in health insurance. And whether coincidence or not, PIA members already are experiencing the reality of more work in health insurance for even less pay.
For decades, the agent community has been among the most steadfast supporters of the NAIC and the staunchest defenders of state insurance regulation. As we move into a new era of healthcare delivery, we stand ready to work with state regulators to ensure that the intent of Congress that agents be full participants in that system is carried out.
It’s not too late for the NAIC to stand up for agents on this issue. We strongly urge the NAIC to officially recommend to HHS that when it issues its finalized rules, agent compensation be excluded from the MLR calculation.