Florida to Feds: We’re Already Damaged by Agent Commissions in MLR

The state of Florida continues to carry the banner of agents on the medical-loss ratio issue and has petitioned federal health regulators to review the decision not to exempt Florida from the rule.

In a Dec. 30 letter to the U.S. Department of Health and Human Services (HHS), Florida’s Office of Insurance Regulation (OIR) said the provision of the health-care insurance-reform law limiting administrative costs to 20 percent of premiums is harming the state’s insurance market.

The letter objects to HHS’ Dec. 15 letter rejecting the state’s demand for an exemption from the MLR provision of the health-care law, the Patient Protection and Affordable Care Act (PPACA).

Florida Insurance Commissioner Kevin McCarty, who is now the president of the National Association of Insurance Commissioners, led the battle by the NAIC to have agents’ commissions removed from the MLR formula. NAIC commissioners supported McCarty by a narrow margin in a Nov. 23 conference call.

However, in a recently released ruling, HHS affirmed that agent commissions are included in the MLR.

The latest Florida OIR letter was sent to Steve Larsen, deputy director of the Center for Consumer Information and Insurance Oversight at HHS.

Industry analysts and lawyers assert that HHS is correct in saying it doesn’t have the legal authority to exempt agents from the MLR.

In the letter, McCarty wrote, “Failure to obtain the requested adjustment will cause permanent, irreparable harm to our market and the distribution channel for health products and services.”

McCarty said the HHS has been dismissive of insurers’ testimony and announcements that companies would leave the individual market. In fact, he added, significant damage has already occurred.

“Since the passage of the [PPACA], Florida has not received any applications for new entrants into the individual market, and no new issuers appear to be interested in expanding into this market,” McCarty’s letter read.

McCarty outlined the severe impact on the agent community as a result of the HHS decision to deny the exemption. He cited an “informal survey” to show harm to agents as a result of cuts in agent commissions and he said the OIR intends to send by Jan. 6 notarized letters that clearly document the MLR’s impact on the agent community.

The OIR has been collecting data and testimony for almost a year on the challenges to its market created by the higher MLR, which indirectly cuts off agents’ commissions at the knees by considering those fees as part of the administrative element of the ratio and not the care portion.

McCarty portrayed the agents as consumer advocates in his letter, saying their role is to assist consumers in gaining pre-certifications for various medical procedures and helping consumers navigate the health-care-delivery system.