State Regulators Worried About Future of Health Insurance Brokers

November 29, 2010

State insurance regulators have established a task force to monitor the negative effects the new federal health reform law might have on health insurance agents and brokers.

The National Association of Insurance Commissioners (NAIC), which rejected pleas to protect brokers’ commissions from a strict medical loss ratio required under the new health reform law, said its task force will “address potential adverse impacts on the role of licensed health insurance agents and brokers resulting from the new federal health care reform law.” The task force will be chaired by NAIC Vice President and Florida Insurance Commissioner Kevin M. McCarty.

McCarty was one of a dozen state insurance commissioners who signed a letter in October urging the NAIC to exclude agent commissions from the recommended MLR calculation, which mandates how much of each premium dollar health insurers must spend on direct health claims costs, as opposed to administrative, marketing and sales expenses.

The NAIC did adopt a resolution that affirmed the role of health insurance agents in providing services to consumers and businesses as standards for implementing the new federal law are developed but the group stopped short of recommending that HHS protect agents’ compensation in the new MLR. HHS, following recommendations by the NAIC, has since classified agent and broker fees and commissions as non-claims expenses.

“With the recent issuance by HHS [Health and Human Services] of the medical loss ratio (MLR) regulations to be imposed on insurers, there is a very real possibility the role of health insurance agents will be impacted in a negative way,” said McCarty. “Health insurance is a complex product and experienced and licensed agents are a valuable resource for consumers. We intend to work with the agent community and our colleagues at HHS to maintain that resource.”

Insurance agents have argued that they provide important services for consumers not only at the time of the sale but after the sale as well with claims and compliance and that their role will be even more important as the new health reform law is being implemented. However, they fear that they will be squeezed out by insurers that must control non-claim expenses under the MLR.

The Independent Insurance Agents and Brokers of America (Big “I”) has said it may ask Congress to step in and protect agents’ compensation under the MLR.

Robert Rusbuldt, president and CEO of the Big “I”, said his trade group is “extremely concerned that this rule will lead to severe market disruption, especially in the individual and small group markets.”

“This is an extremely important issue for the NAIC,” said NAIC President and West Virginia Insurance Commissioner Jane L. Cline. “State insurance regulators recognize the important role of licensed health insurance professionals in serving the needs of individual consumers as well as the business community. We must look at ways to protect their ability to continue serving the public as the new federal law is implemented.”

The new task force plans to hold its initial meeting in mid-December.

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