Agents Seeking To Protect Commissions In MLR Debate

Washington

A coalition of insurance agent groups is asking the National Association of Insurance Commissioners to exclude commissions from a new medical loss ratio requirement in the federal health care reform law.

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 administrative spending cap for carriers, since 100 percent of the commissions are transferred to independent third parties.

The new health care law 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.

Carriers and plans that spend too little are supposed to pay rebates.

"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 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 to the NAIC are the Independent Insurance Agents and Brokers of America, the National Association of Health Underwriters, and the National Association of Insurance and Financial Advisors.

In related news, the U.S. Department of Health and Human Services issued a statement that it will allow great flexibility to employers in applying MLR standards to certain health plans.

The issue is of concern to health insurance agents and brokers, especially as it affects mini-medical plans, which provide limited health care benefits to certain employees, such as part-time workers employed by large corporations.

Although the NAIC is close to completing its work on MLR standards, some employers must soon make decisions about coverage options for 2011, noted Jay Angoff, a former state insurance regulator who is now HHS director of consumer information and insurance oversight.

"We fully intend to exercise our discretion under the new law to address the special circumstances of mini-med plans in the medical loss ratio calculations," he said.