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

The Department of Health and Human Services is being criticized for allegedly interfering with National Association of Insurance Commissioners' deliberations on health care issues in a comment letter sent by independent agents on the medical loss ratio issue.

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

Health care 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 15 percent.

Agent groups have sought to exclude agent commissions from the 20 percent administrative cost restriction.

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

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

The IIABA letter noted that during the NAIC deliberations on the issue, 15 bipartisan regulators drafted and co-sponsored an amendment to the NAIC's recommendation that would have excluded their commissions from the proposed methodology.

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

But, the letter added, federal representatives reportedly weighed in on the matter outside of the public eye, discouraged NAIC leaders from considering the popular and broadly supported amendment, and influenced what should have been an impartial and independent decision-making process among state insurance regulators.

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

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

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

The comment letter was sent as Politico, a Washington tabloid that covers legislative and regulatory issues, said in an article that its own study shows that brokers who were used to making 15 or 20 percent on plans they sold will now typically make between 4 and 10 percent.

Agents are pursuing a number of options in seeking exemption from the MLR formula, including seeking support for legislation that would mandate an exemption from the MLR formula for agent commissions.

Special Reports /

IIABA Says HHS Interfering In NAIC MLR Deliberations

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