Bill Exempting Agent Commissions from MLR Passes Committee, but Faces Hurdles

Legislation that would exempt agent commissions from the medical loss ratio (MLR) calculation mandated under the healthcare-reform law passed a House committee today.

The bill is H.R. 1206. It is sponsored by Rep. Mike Rogers, R-Mich., and Rep. John Barrow, D-Ga. It was introduced last March.

The bill was passed by voice vote by the House Energy and Commerce Committee (E&C). According to officials of the committee, the bill now goes directly to the House floor. 

However, given that both the House and Senate will recess Friday until after the November election, final action is unlikely before late fall. And, while the legislation could pass the House, its future in the more evenly-divided Senate is problematic, according to analysts at Washington Analysis.

The bill has strong support within the agent community, with the Independent Insurance Agents and Brokers of America (IIABA), the National Association of Insurance and Financial Advisors (NAIFA) and the National Association of Health Underwriters (NAHU) all voicing strong support.

However, Charles E. Symington, senior vice president for government affairs for the IIABA, acknowledged in a statement that the “the window of opportunity for the bill to become law this year is quickly narrowing.”

He said the IIABA commends the bill’s sponsors, Rogers and Barrow, for their diligent work on this issue and asks Congress to build on "recent momentum to pass this crucial fix.”

Democrats on the E&C committee challenge supporters' assertions that the MLR impact on insurance agents is “devastating,” and is impacting jobs.

The MLR provision in the Patient Protection and Affordable Care Act (PPACA) limits administrative costs on health care premiums to 15 percent for large groups and 20 percent for small group and individual market premiums.

The legislation only impacts agents serving the small group and individual markets.

The bill also requires Health and Human Services (HHS) to defer to state insurance commissioners regarding requests for MLR waivers.

In asking the committee to report out the legislation today, Rep. Fred Upton, R-Mich., chairman of the committee, said PPACA’s MLR requirement gives the HHS sweeping power over the design of health insurance at the expense of consumer choice.

He adds, “The MLR rule also punishes agents and brokers who help families and employers find an affordable health plan that best fits their needs.”

However, E&C panel Democrats said in a background brief that while the MLR has been in effect, the number of jobs in the agent and broker field has increased, not decreased.

“Since May 2012, 7,000 jobs were added, according to the non-partisan Insurance Information Institute,” the Democratic statement said.

The Democratic statement also said, “In making MLR adjustment requests to the HHS, no state could prove – and many never seriously contended – that the 80/20 rule was having a negative impact on consumers’ ability to obtain broker services.”

Another hurdle for the legislation is an HHS study released last week that said consumers have saved $2.1 billion over the last year because of the MLR.

Healthcare for America Now, which lobbied for the healthcare bill, also sent a statement to the committee noting that in 2012, nearly 13 million consumers received rebates of $1.1 billion from insurers with excessive administrative expenditures in the previous year.

Still, Ryan Young, IIABA senior director of federal government affairs, contends, “If the MLR calculation is not quickly corrected to exclude agent compensation, consumers are at risk of losing the professional, licensed guidance of insurance agents during this time of great change in the health insurance market.”

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