NAIC Committee Supports Pass-Through For Agent HC Commissions

NU Online News Service, Oct. 15, 3:38 p.m. EDT

WASHINGTON–A key committee of the National Association of Insurance Commissioners (NAIC) late Thursday continued to support allowing health care insurers to pass agents' commissions through to customers.

The NAIC Health Insurance and Managed Care Committee is supporting the pass-through provision in any regulation it proposes to limit administrative costs that health care insurers could pass on to consumers in health care premiums–called the medical loss ratio (MLR).

Industry officials cautioned that the actions of the committee are only advisory and that the final decision on agent commissions would be made by the Department of Health and Human Services.

The NAIC panel's support for insurance agents was included in a model regulation containing the definitions and methodologies for MLR. The next step is action by the full NAIC and then final action by HHS.

Effectively, the panel approved the "blank" that health care insurance underwriters must abide by effective Jan. 1 under the health care reform law. The law requires that medical costs comprise either 80 percent or 85 percent of premiums charged to subscribers.

The NAIC had sought to secure HHS approval to allow agents' premiums to be passed through to consumers by including in the MLR blank a resolution that states, "As important consumer protections and assistance programs are implemented over the next four years, and as insurance markets evolve during the transition to exchanges, the role of insurance producers (agents and brokers) will be especially important. We encourage HHS to recognize the essential role served by producers and accommodate producer compensation arrangements in any MLR regulation promulgated."

John Greene, vice president of congressional affairs for the National Association of Health Underwriters (NAHU), said some sort of pass-through for agents is justified.

A NAHU survey of its members showed half of what health insurance agents do is unrelated to the sale of the product, he said. That includes handling claims problems for customers as well as explaining to them the limits and benefits of their policies.

The NAIC panel also shifted final action on some important issues for insurance agents to the full NAIC, which will meet next week, according to Nicole Allen, senior vice president, strategic resources, for the Council of Insurance Agents & Brokers (CIAB).

These issues include the need for a nationwide transition period for individual and small group business and the question of whether insurers should be permitted to combine their large group MLR data across state lines and operating subsidiaries, Ms. Allen said.

"These issues will be very critical to the implementation of the MLRs and to preventing possible market disruptions, and we urge the commissioners to give careful consideration to both of these items," Ms. Allen said.

In a statement this morning to NU Online News Service, Charles Symington, senior vice president of governmental affairs for the Independent Insurance Agents and Brokers of America (IIABA), said his group is very concerned the MLR provision would have a harmful effect on the private marketplace, especially in the small group and individual markets.

"As a result, the IIABA and our coalition partners have urged the NAIC to adopt a phased-in transition period for the MLR restrictions to take effect," Mr. Symington said. "By instituting a phased-in transition, the IIABA and other groups believe that the NAIC and HHS could ease some of this disruption by allowing the marketplace time to adjust to these new drastic requirements."