Washington
Insurance agents and brokers should focus on the medical loss ratio benchmark set for carriers in health care reform legislation because that will determine their future commissions, a health care law and policy expert warns.
Bruce Fried, a partner in the Washington, D.C. office of Sonnenschein Nath & Rosenthal LLP, said the Senate version of the bill sets limits on a health insurer's medical loss ratio–the percentage of premium spent on actual patient care services.
That in turn means insurers might have to reduce administrative costs to meet the new standard–and one place they will do that is by squeezing agent commissions.
"The final provisions dealing with MLR are going to be critical for agents and brokers," observed Mr. Fried. "That is what they should focus on."
Effective in 2010, the Senate bill sets up an 80 percent medial loss ratio for individual- and small-group plans, and an 85 percent MLR for large group plans.
Mr. Fried said the impact of this bill will be far-reaching, but it will ultimately be beneficial for underwriters, agents and brokers because it will offer opportunities to sell insurance for up to 33 million new customers.
At the same time, he said, introduction of health insurance exchanges through the legislation will not necessarily be a negative for agents and brokers. "Nobody knows how many people will obtain coverage through these exchanges," he noted.
He believes the most successful competitors will be those who see this as an opportunity and look for ways to take advantage of new business prospects–in part by helping consumers navigate amidst the chaos while adjusting to the new market.
"There are millions of Americans who are going to have coverage for the first time, and that is a new market for brokers and agents as it is for everyone else," he said.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.