Win Ratio

A task force of state insurance regulators has recommended that states support legislation to protect agent and broker commissions from the expense cap imposed on health insurers by the new federal healthcare law’s medical loss ratio (MLR).

A health insurance advisers task force of the National Association of Insurance Commissioners (NAIC) voted to back H.R. 1206, the Professional Health Insurance Advisors Act of 2011, introduced in Congress by Rep. Mike Rogers, R-Mich. Federal healthcare law requires insurers to spend at least 80 percent of premiums on medical costs and are limited only 20 percent for profits, marketing and administration – including agent and broker fees.

The Rogers bill would remove agent and broker fees from that MLR calculation. Last year, the NAIC supported a formula that included agent and broker fees in the administrative portion of the MLR. Agents and broker have balked at having their income placed under the MLR’s administrative formula, arguing that insurers will look to cut their fees as a way to stay in compliance and, in fact, many have already begun cutting. A survey by the National Association of Financial Advisors found that 75 percent of insurance brokers have seen their fees decrease since MLR was announced.

Now regulators who are close to their states’ health insurance marketplace have echoed agents’ concerns.

Agents, who fear they will be marginalized if the formula is not changed, were encouraged by the task force move. “This fix is desperately needed to ensure consumers can continue to rely on trusted health care advisors,” said Charles Symington, Independent Insurance Agents and Brokers of America.

Some consumer groups, however, do not want to see the MLR formula changed. Consumer Watchdog said the legislation would preserve broker sales commissions and benefit the bottom line of insurance companies at the expense of consumers.

“The insurance regulators who voted for this plan sold consumers in their states down the river by endorsing higher health insurance premiums and millions in lost rebates to benefit their friends in the insurance industry,” said Carmen Balber, Washington director for Consumer Watchdog.

The full NAIC has not yet set a date to consider the task force’s recommendation.

The Obama Administration is unlikely to budge at this point on its MLR position, meaning legislation is the most likely route to what agents want. It seems like an uphill battle given all that Congress has on its plate. But when it comes to politics, in Washington or anywhere never, never, never rule agents out.

Topics Agencies Legislation