WASHINGTON—The state of Florida continues to carry the banner ofagents on the medical loss ratio issue, asking federal healthregulators to review its decision not to exempt Florida from therule.

In a Dec. 30 letter to the U.S. Department of Healthand Human Services, Florida's Office of Insurance Regulationsays the provision of the healthcare insurance reform law limitingadministrative costs to 20 percent of premiums is harming thestate's insurance market.

The letter objects to HHS's Dec. 15 letter rejecting the state'sdemand for an exemption from the MLR provision of the healthcarelaw, the Patient Protection and Affordable Care Act.

Kevin McCarty, Florida's insurance commissioner who is now thepresident of the National Association of InsuranceCommissioners, led the battle by the NAIC to have agentcommissions removed from the MLR formula. NAIC commissionerssupported McCarty by a narrow margin in a Nov. 23 conferencecall.

But, in a final rule and interim final rule issued a week later,HHS affirmed an earlier NAIC decision that included agentcommissions in the MLR.

The latest Florida OIR letter was sent to Steve Larsen, deputydirector of the Center for Consumer Information and InsuranceOversight at HHS.

Industry analysts and lawyers assert that HHS is correct insaying it doesn't have the legal authority to exempt agents fromthe MLR.

In the letter, McCarty says, ”Failure to obtain therequested adjustment will cause permanent, irreparable harm to ourmarket and the distribution channel for health products andservices.”

McCarty says the HHS has been dismissive of insurers'testimony and announcements that companies would leave theindividual market. In fact, significant damagehas already occurred.

“Since the passage of the [PPACA], Florida has not received anyapplications for new entrants into the individual market, and nonew issuers appear to be interested in expanding into this market,”McCarty's letter says.

McCarty outlined the severe impact on the agent community as aresult of the HHS decision to deny the exemption.

He cites an “informal survey” to show harm to agents as aresult of cuts in agent commissions, and says the OIR intendsto send notarized letters that clearly document the MLR's impact onthe agent community by Jan. 6.

The OIR has been collecting data and testimony for almost ayear on the challenges to its market created by the higher MLR,which indirectly cuts off agent commission at the knees byconsidering those fees as part of the administrative element of theratio and not the care portion.

McCarty portrayed the agents as consumer advocates in hisletter, saying their role is to assist consumers in gainingprecertifications for various medical procedures and helpingconsumers navigate the healthcare delivery system.

McCarty also issued a memo Dec. 28 notifying Floridahealth insurers and HMOs that Florida has not enacted any guidanceelecting to use the statutory 50 employee mark as the upperlimit for purposes of reporting small employer MLRs, so that,in effect the state law would be superseded by the more generous(for MLR purposes) federal PPACA definition of a small groupemployer as having employees between 1 and 100.

See: http://www.floir.com/siteDocuments/OIR-11-09M.pdf