Consumer Watchdog Condemns Insurance Commissioners’ “Sellout” Vote To Gut Health Premium Protection, Deny Consumers $1.1 Billion in Rebates

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Washington, DC — State insurance commissioners voted narrowly Tuesday afternoon for a resolution aiming to gut a key consumer protection in the health reform law. The plan would cost consumers an estimated $1.1 billion in premium rebates and leave them open to major rate hikes, said Consumer Watchdog. The members of the National Association of Insurance Commissioners (NAIC) were bitterly split over the vote.
“The insurance commissioners who supported this special-interest resolution have sold out consumers to the insurance industry,” said Carmen Balber, Washington director for Consumer Watchdog. “Health insurers and brokers demanded that state regulators gut the health reform law’s only check on excessive salaries and profits, and a majority of state insurance commissioners complied. The split vote means the NAIC’s recommendation has no credibility and Congress should ignore it.”
The resolution to amend the medical loss ratio rule for the benefit of insurance companies and their brokers and agents was strongly opposed by consumer and patient groups as well as many commissioners. The proposal caused an unprecedented rift among commissioners, resulting in a split vote of 26-20 with 5 abstentions, meaning half the commissioners who stated a position refused to support.
Opponents from major states including California, New York, Oregon, Washington, Minnesota and Connecticut argued strongly that the resolution had never been opened to public comment or even considered in its current form by an NAIC committee. They also warned that the politicized split vote would damage the reputation of the NAIC as an objective voice on health insurance matters, and destroy the trust of consumers in its protection.
The resolution urges Congress and HHS to exempt broker and agent pay from the medical loss ratio rule by deleting it from insurance company administrative costs. This would eliminate pressure on health insurance companies to decrease costs by improving efficiency. It would render meaningless the requirement that companies spend 80% to 85% of health premiums on actual health care by restricting overhead, salaries, commissions and profit.
“The NAIC cannot survive after this vote as a trusted advisor to all of the states on insurance laws and regulations,” said Judy Dugan, research director of Consumer Watchdog. “For years it billed itself as a data-driven consensus organization, sometimes to the detriment of consumers. Now, on an issue that is blatantly pro-industry, and of certain harm to consumers, a bare majority has tossed caution and consensus overboard.”
Florida Insurance Commissioner Kevin McCarty led the drive for the industry-backed resolution before the National Association of Insurance Commissioners. Florida Governor Rick Scott, at whose pleasure McCarty serves, is an avowed opponent of any federal health reform.
Insurers and brokers are hoping the resolution will spur action by HHS or Congress. However, no reasonable interpretation of the Affordable Care Act would allow HHS to change the way broker pay is calculated, said Consumer Watchdog, so direct amendment of the Affordable Care Act by Congress is the only way the resolution could move forward.
Backers of the resolution before the NAIC assert that it is necessary to ensure consumers have access to the advice of brokers and agents in choosing and dealing with insurance companies. However, all credible data says otherwise, said Consumer Watchdog.
The resolution would harm consumers.
– Consumers will lose an estimated $1.1 billion in rebates next year alone, and face higher premiums from health insurance companies.

It solves a problem that doesn’t exist – consumer access to brokers.
– The NAIC surveyed states that already have a medical loss ratio at or near the federal standard. Not a single consumer had trouble accessing an insurance broker in these states.  

The resolution would gut the medical loss ratio that is driving down health insurance premium increases.
– For example, Aetna in Connecticut announced an average 10% decrease in premiums to meet the new efficiency standards. Such savings would be eliminated.

The plan is very unlikely to protect broker compensation.
– The resolution contains no assurance that insurance companies must pay brokers more. Insurers are far more likely to book any windfall from the change as profits, according to insurance commissioners who oppose the regulation.

Read the resolution, which was slightly amended on today’s call, here:
The votes:

26 AYE — Alabama, Alaska, Arkansas, Delaware, Florida, Georgia, Idaho, Indiana, Kentucky, Louisiana, Michigan, Mississippi, Nebraska, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Utah, Wyoming and American Samoa.
20 NO — Arizona, California, Colorado, Connecticut, District of Columbia, Hawaii, Illinois, Kansas, Maryland, Massachusetts, Minnesota, Missouri, New York, Oregon, Rhode Island, Vermont, Washington, West Virginia, the Mariana Islands and Puerto Rico.
5 ABSTAIN — Maine, Montana, South Dakota, Texas and Virginia.
Not present or not voting were Iowa, New Mexico and Wisconsin.
– 30 –

Consumer Watchdog is a nonprofit, nonpartisan consumer advocacy organization with offices in Washington, DC and Santa Monica, CA. Find us on the web at:

Carmen Balber
Carmen Balber
Consumer Watchdog executive director Carmen Balber has been with the organization for nearly two decades. She spent four years directing the group’s Washington, D.C. office where she advocated for key health insurance market reforms that were ultimately enacted into law as part of the Affordable Care Act.

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