Smoking Gun Documents Show Health Insurance Brokers Are Paid Commissions as High as 20% of Consumers’ Premiums

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Washington, DC — Consumer Watchdog today exposed documents obtained from the National Association of Insurance Commissioners (NAIC) showing that insurance salespeople are paid as much as 20% of a consumer’s health insurance premiums.
A second document is a draft letter from the NAIC asking the White House to delay key consumer protections in the health reform law in order to protect those sales commissions on behalf of the lobby for insurance brokers.
The NAIC is supposed to hear testimony from consumer advocates and vote this weekend on whether to sponsor legislation for the brokers that will raise health insurance premiums and deprive consumers of hundreds of millions of dollars in premium rebates. The letter shows the issue was decided in advance of the hearing and vote.
“The health reform law caps all administrative costs at 20% of consumers’ insurance premiums. Insurance salespeople want 20% of some policies just for themselves. Eliminating this sort of excessive spending is the whole reason health reform capped insurance companies’ overhead. If the NAIC tries to override those protections it would cost consumers millions,” said Carmen Balber, Washington director for Consumer Watchdog.
See a sample report of broker commissions as high as 22% in Colorado:  
Commissions as high as 15% in Alaska:
And commissions up to 20% in Florida:
See the NAIC draft letter at

The draft letter shows the leadership’s intent to put the NAIC’s name on the broker legislation, and that the issue was decided in advance of the national NAIC meeting, despite a scheduled debate on Sunday. The legislation’s chief advocate is Florida’s insurance commissioner, Kevin McCarty, who opposes the health reform law altogether.
“This letter is a smoking gun” said Judy Dugan, research director for Consumer Watchdog. “It shows that the leaders of the NAIC expect to roll over consumer-friendly regulators on their way to delaying key consumer protections of health reform until NAIC and insurance lobbyists can kill those protections in Congress.”
The draft letter asks Secretary of Health and Human Services Kathleen Sebelius to:
 “…delay implementation [of] that portion of the interim final rule that defines ‘[a]gents and brokers fees and commissions’ as expenses for administrative services. The NAIC is pursuing Congressional legislation that would clarify that such expenses are taken out of the calculation of the MLR. “
Translation of the jargon:


  • MLR means “medical loss ratio,” or the portion of health insurance premiums spent on actual health care.
  • The federal Affordable Care Act  requires health insurance companies to spend 80% to 85% of premium dollars on health care and administration. Any lower figure triggers a rebate of the difference to consumers.
  • Sales commissions, paid to outside insurance brokers have always been considered administrative costs.
  • The legislation, which was written by the broker lobby, would deduct broker commissions, ranging up to 20% on individual policies, from the administrative costs.
  • The effect would be that no insurer would have to become more efficient, consumers would rarely or never get a rebate, and insurers who exceed the MLR because of the deduction will be free to raise premiums.

“We know that there are several state insurance commissioners who take consumer protection seriously and have objections to putting the NAIC’s name on this special-interest legislation,” said Dugan.  “This letter, written in advance of any discussion by all of the commissioners, arrogantly assumes that thoughtful commissioners’ objections can be ignored and swept aside.”
See Consumer Watchdog’s comments to the NAIC on the legislation, and an analysis of insurance commissioners’ ties to the insurance industry, at
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Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. 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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