NU Online News Service, Jan. 7, 3:59 p.m.EST

The Department of Health and Human Services is being criticizedfor allegedly interfering with National Association of InsuranceCommissioners' deliberations on health care issues in a commentletter sent by independent agents on the medical loss ratioissue.

In a letter sent to the HHS Thursday, the Independent InsuranceAgents and Brokers of America (IIABA) again repeated its request that agent commissions on health care insurance bedeemed a "pass-through," and therefore exempted from the newmedical loss ratio (MLR) formula.

Health care reform legislation passed by the Obamaadministration last year stipulates that for individual healthinsurance policies, 80 percent of premiums must be spent on medicalcare and quality improvement activities, with administrative costslimited to a maximum of 20 percent. The cap for group health plansis 15 percent.

Agent groups have sought to exclude agent commissions from the20 percent administrative cost restriction.

The latest IIABA letter was a response to an HHS request forcomments on the legal issues involved in the MLR issue and howagents can continue to play a role in health care.

The letter was signed by Robert Rusbuldt, president and CEO ofIIABA, and Charles Symington, the association's senior vicepresident, government affairs.

The IIABA letter noted that during the NAIC deliberations on theissue, 15 bipartisan regulators drafted and co-sponsored anamendment to the NAIC's recommendation that would have excludedtheir commissions from the proposed methodology.

The letter said this group of regulators noted that "the MLRmandates will almost certainly produce considerable disruptiveeffects in the marketplace unless some relief is provided" and thattheir amendment would help prevent "this near-certain shock effect"from occurring.

But, the letter added, federal representatives reportedlyweighed in on the matter outside of the public eye, discouragedNAIC leaders from considering the popular and broadly supportedamendment, and influenced what should have been an impartial andindependent decision-making process among state insuranceregulators.

The letter argued that "it is inappropriate and misleading toclassify compensation paid to agents and brokers by their customersas revenue to the insurance company, and thus this compensationshould not be part of the MLR formula."

The letter acknowledged that in its interim final rule, HHSallowed for up to a three-year "adjustment" of the MLR standard inany state that can provide evidence that meeting the ratiorequirements would destabilize the individual market.

But, the letter said, "We feel these 'adjustments' areinsufficient since they are, as noted, temporary and only apply tothe individual market."

The comment letter was sent as Politico, a Washington tabloidthat covers legislative and regulatory issues, said in an articlethat its own study shows that brokers who were used to making 15 or20 percent on plans they sold will now typically make between 4 and10 percent.

Agents are pursuing a number of options in seeking exemptionfrom the MLR formula, including seeking support for legislationthat would mandate an exemption from the MLR formula for agentcommissions.