Insurance Task Force Punts Brokers’ Fee Exemption

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Lawmakers pushing to exempt insurance brokers’ fees from a new regulation in the health care law suffered a setback this weekend when the National Association of Insurance Commissioners declined to take action to support the change.

After hearing from consumer groups and insurance agent representatives, a task force set up by the state insurance commissioners essentially punted on the issue, voting Sunday afternoon to ask a committee to report back within four weeks on possible modifications.

The NAIC’s endorsement would have given the House bill (HR 1206 <> ) a significant boost. The measure boasts bipartisan sponsorship in the House, as well as strong support from NAIC president-elect and Florida Insurance Commissioner Kevin McCarty along with agents’ and insurers’ groups, but faces resistance from Senate Democrats and consumer groups.

“I would define it as a small, short-term victory for consumers,” said Stephen Finan, senior policy director for the American Cancer Society Cancer Action Network. “We were able to convince [the commissioners] that they were moving too hastily, that they had not thought through the consequences of this for consumers. It has the potential of raising premiums and probably obliterating any benefits of a medical loss ratio.”

Finan, who lobbied against the proposal at the NAIC meeting, said his group would continue to talk with the insurance commissioners about the House proposal’s effects on consumers.

The bill would exempt fees charged by health insurance brokers from being classified as administrative costs under the law’s new medical loss ratio regulations. Those regulations require insurers to spend at least 80 percent of subscribers’ premium dollars on medical care, rather than on administrative costs such as executive salaries, marketing, and profits.

Brokers complain that insurance companies are cutting their commissions as a way of trimming administrative costs, resulting in job losses for agents and brokers. If insurers do not meet the law’s standards for premiums spent on medical care — 80 percent for individual policies and 85 percent for big groups — they must issue rebate checks to consumers the next year.

But many Senate Democrats, including John D. Rockefeller IV <>  of West Virginia, argue that changing the medical loss ratio would undermine one of the most significant consumer protections in the law (PL 111-148 <> , PL 111-152 <> ).

“We applaud the consumer-focused state commissioners who made their doubts known,” said Judy Dugan, research director for nonprofit group Consumer Watchdog, which testified against the change at Sunday’s meeting. “They put the brakes on an industry pay bonus from the pockets of consumers and taxpayers.”

The NAIC’s move leaves the bill’s future uncertain, with no hearings yet scheduled.

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