Agents Seek to Exclude Commissions From MLR Requirements

The coalition suggested in a letter to the NAIC that, in writing final instructions on the MLR, agent and broker commissions should not be included in the 20 percent administrative spending requirements for carriers, since 100 percent of the commissions are transferred to independent third parties.

The new health care law stipulates that administrative costs be limited to a maximum of 20 percent of insurance premiums, with 80 percent going to pay claims.

"Exempting pass-through fees from the MLR calculation would preserve existing cost-saving practices in current health insurance markets and further the intent" of the health care provisions to reduce overall spending on administrative costs," according to the letter.

"At the same time," it added, "it would preserve an important operational convenience for small businesses and individuals."

Currently, brokers servicing large employers have commissions in the 2-to-3 percent range, while agents serving the small group and middle markets earn commissions of up to 20 percent.

In the letter, the agent coalition also asks for an MLR requirement transition period for 2011 where rebates would be issued to cover agent commissions.

"This lack of a transition will be extremely destabilizing for the individual and small group markets in many states" unless something is done, the letter stated.

The coalition members who signed the letter, sent Tuesday to the NAIC, are the Independent Insurance Agents of America, the National Association of Health Underwriters, and the National Association of Insurance and Financial Advisors.