Draft Bill Would Exclude Agent Pay from Health Reform Rule

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WASHINGTON, D.C. — Draft legislation being shopped around Congress and considered by the National Association of Insurance Commissioners would remove producer compensation from medical loss ratio calculations, overturning part of a new federal regulation under the Affordable Care Act.

Insurance agents strongly support the bill, as they fear taking a financial hit from the U.S. Department of Health and Human Services rule that their commissions should be considered administrative expenses in determining MLR.

"That would put incredible downward pressure on compensation and that's what we're concerned about," said Mike Becker, national director of federal affairs for the National Association of Professional Insurance Agents.

The NAIC's Task Force on Professional Health Insurance Advisors is discussing the legislation with a goal to "preserve consumer and employer access to professional health insurance advisers," according to the draft. The task force is accepting public comments through March 14 and the issue is on the agenda for the NAIC's spring national meeting in Austin, Texas March 26-29. The association created the task force late last year, after declining to vote at its fall meeting on a proposal advanced by Florida Insurance Commissioner Kevin McCarty and others to exclude producer compensation from MLR calculations (BestWire, Dec. 3, 2010). The NAIC named McCarty to lead the task force and asked it to address the concerns of producers.

HHS adopted the NAIC's recommendations on MLR, which included classifying agent commissions as administrative expenses, in November (BestWire, Nov. 23, 2010).

As of Jan. 1, health insurance carriers must disclose how they spend premium dollars. By 2012, large group health plans will also be required to issue refunds to policyholders if they spend less than 80% of premium income on actual medical care and activities to improve the quality of care; the level is 85% for large group plans.

The draft legislation would treat producer compensation in the same manner as federal and state taxes, said Jack McDermott, spokesman for the Florida Office of Insurance Regulation. "It would change federal law to remove agent commissions completely from the ratio," he said. "Therefore, it is the office's belief that the current proposal is consistent with the values espoused by the NAIC during the October meeting."

If agent pay is excluded from administrative expenses, the result will be higher premiums, 16 consumer representatives wrote in a letter to the task force. The NAIC-designated consumer liaisons said they cannot support the draft legislation. "Passing these higher commission costs on to consumers seems to be assumed in this proposed legislation," they wrote.

Rep. Mike Rogers, R-Mich., is planning to introduce legislation making the MLR change, said Charles Symington, senior vice president of government affairs for the Independent Insurance Agents & Brokers of America. "The Big 'I' strongly supports this effort as the MLR regulations are already having a damaging effect on our thousands of small business members throughout the country," he said in an e-mail.

Attempts to reach Rogers for  comment were unsuccessful.

"Brokers tried and failed to get lifetime protection for their commissions in the federal reform law, then tried and failed to get protection written into the regulations adopted by the Department of Health and Human Services," Carmen Balber, Washington director of the nonprofit Consumer Watchdog, said in a statement. "Now, with a new Congress, they see a chance to guarantee their own paydays at the expense of ever-rising health insurance premiums."

Contact the author, Sean P. Carr, Washington Bureau Manager at: [email protected]

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