Two U.S. senators have filed a bill to clarify that agent compensation should be excluded from the federal health reform Medical Loss Ratio (MLR) requirement for the individual and small group markets.
Sen. Mary L. Landrieu, D-La., chair of the Senate Committee on Small Business and Entrepreneurship, and Sen. Johnny Isakson, R-Ga., have introduced S. 2068, the Access to Independent Health Insurance Advisors Act. Sens. Lisa Murkowski, R-Alaska, and Ben Nelson, D-Neb., are also cosponsors of the legislation.
The MLR contained in the Affordable Care Act has had dramatic, unintended consequences for nearly a half million licensed independent agents and brokers, and their employees, the senators’ announcement said.
Due to the Department of Health and Human Services’ (HHS) interpretation of the MLR provisions in the health reform law, health insurance carriers are required to treat agent and broker commissions as part of their administrative costs. This threatens the ability of independent agents and brokers to stay in business and serve the public. S. 2068 excludes from the MLR compensation earned by independent agents and brokers that serve the individual and small group markets.
“I am concerned that HHS’s interpretation of the health care law threatens the ability of insurance agents and brokers — many of whom are one- or two-person small businesses —to continue providing essential services to consumers who depend on them to assist with coverage or claims problems. Many brokers are being forced to reduce client services or close their doors altogether due to unintended consequences of these regulations,” Sen. Landrieu said in a statement released by her office. “This is about strengthening the Affordable Care Act and ensuring that these small independent firms can stay in business and continue to provide critical services to consumers.”
This legislation is supported by the National Association of Health Underwriters (NAHU), the Independent Insurance Agents & Brokers of America (IIABA) and the National Association of Insurance and Financial Advisors (NAIFA).
The Patient Protection and Affordable Care Act (PPACA) established MLR requirements for insurance carriers, which went into effect on Jan. 1, 2011. The law mandates that at least 80 percent (individual and small group) or 85 percent (large group) of premiums collected by the carrier must be spent on “health care quality improvement.” In other words, no more than 20 percent or 15 percent, respectively, may go towards “non-claims costs” such as profits, advertising, administrative costs, etc. If a carrier does not meet these ratios, rebates are due to the consumer.
The law did not statutorily address how to classify independent agent compensation under the MLR formula. However, the HHS has ruled that not only was agent compensation included in the MLR formula but it was included as a part of the “non-claims costs” category, according to the IIABA.
The Landrieu-Isakson legislation corrects this policy decision by specifically excluding agent compensation from the MLR formula in the individual and small group markets. Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) have introduced similar legislation in the House of Representatives (H.R. 1206, the “Access to Professional Health Insurance Advisors Act of 2011”), which currently has 160 bipartisan cosponsors.
Robert Rusbuldt, president and CEO of IIABA, expressed gratitude to the senators for filing the bill. “We urge both Senate and House leadership to quickly act on the Landrieu-Isakson legislation and the companion Rogers-Barrow legislation that is pending in the House of Representatives,” he said.