Health Insurance Brokers, State Insurance Commissioners, Seek to Cripple Key Consumer Protection in Health Reform

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Washington DC – The lobby for health insurance salespeople seeks to rewrite the health reform law to guarantee broker income at the cost of increasing consumer premiums, said Consumer Watchdog Thursday.
Legislation backed by lobbyists for insurance brokers and independent agents would let insurance companies pay commissions on individual and small-business policies without counting them as administrative expenses. The result would be to cripple the cap on administrative expenses contained in the federal Affordable Care Act, said Consumer Watchdog.
“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,” said Carmen Balber, Washington director of the nonprofit Consumer Watchdog. “Now, with a new Congress, they see a chance to guarantee their own paydays at the expense of ever-rising health insurance premiums.”
The brokers are backed by some members of the National Association of Insurance Commissioners, who are circulating draft legislation on broker payments. See the draft legislation at
The health reform law requires insurance companies to spend 80% to 85% of premium dollars on health care, with the remainder for overhead and profit. Broker commissions–up to 20% of premium in the first year of a policy and a few percentage points each year after that–have always been considered an overhead cost. If the commissions are removed from the cost equation, insurance companies will be free to ignore the original intent of the law, which was to force insurers to operate more efficiently, spending more on patient care—known in the industry as the “medical loss ratio” or MLR–and less on overhead.
“The insurance industry succeeded in killing any public alternative to private insurance,” said Balber. “Now the insurance sales lobby is trying to guarantee private brokers’ excessive commissions by law, no matter how much it causes premiums to rise.”
The broker system was losing relevance even before the enactment of the federal reform law, said Consumer Watchdog. More people purchase insurance online, unaware that they are paying for the broker fee whether they seek help for the purchase or not. States are increasingly demanding that brokers disclose their fee structures, including financial incentives that favor one insurer over others and appear to constitute a conflict of interest.
It is not the job of Congress, or of state insurance commissioners, to protect an archaic commission payment system for insurance brokers by decreeing that such payments are magically not administrative costs, said Consumer Watchdog.
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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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