Like the horror movie monster that just won't die, insurance companies and the brokers who sell their products have again pressured state insurance regulators into voting on the industry plan to gut a key consumer protection in the health reform law. The secret vote, that even most insurance commissioners didn't know about until they got to the meeting yesterday, is now scheduled for this Sunday.
Insurers and brokers want the National Association of Insurance Commissioners to endorse a change that would destroy the "medical loss ratio" rule that requires insurance companies to spend at least 80 cents of every premium dollar on medical care, not excessive administrative costs, executive salaries and profits. The standard has already caused some health insurance companies to lower consumer premiums and is pressuring others to reduce inefficiencies. The insurance industry plan would take a knife to the rule by excluding broker compensation from the calculation. Such an exemption would reverse the gains we've already seen and effectively eliminate the only provision of the health reform law that directly attacks health insurer greed and waste.
The first two times state regulators considered this issue a public spotlight on the rushed proceedings and lack of evidence of the need for any change stopped commissioners from voting against the interests of consumers.
The NAIC's own staff report found that removing broker compensation from the MLR calculation would have meant a $1.27 billion loss in rebates for consumers in 2010. The same research failed to show that consumers will be harmed if broker pay remains in the MLR formula and some of the most excessive payments are reined in. In fact, of the eight states surveyed that have existing rules requiring MLR near or greater than the 80% federal standard, not a single state reported any consumer complaints about lack of access to insurance brokers. (Download the report.)
There is, however, no doubt that insurers are cutting back on some of the most excessive broker compensation schemes. One North Carolina insurer, Wellpath, reported that the efficiency rule caused it to reduce first-year commissions for individual policies from 27% to 14%. To Wellpath, I say it's about time. The MLR standard was included in the health reform law specifically to eliminate that kind of waste. (Download the letter here.)
All evidence points to the rule beginning to work – but those days will be over before the first rebate check is issued if the NAIC embraces the broker bill.
Rather than putting the plan on the public agenda, its main cheerleader, Commissioner Kevin McCarty of Florida, hoped to slip it through without notice. But the word is out and when the vote goes down Sunday the public will know which insurance commissioners come down on the side of consumers and affordable health care, and which choose to protect insurance industry profits.
Download the latest version of the proposed NAIC resolution we've obtained here.
Please call your state insurance commissioner and ask them to stop the insurance brokers' sneak attack Sunday!
Find out who your state insurance commissioner is by scrolling over your state on the map here.
Call the hotel where they're meeting this weekend in Maryland at 301-965-2000.
Press zero for the front desk, give them the name of your insurance commissioner, and tell them you want to leave a message.
You'll be connected to voicemail.
Ask your commissioner to stop the insurance industry's sneak attack and oppose the resolution that would gut the medical spending rule.
The vote could happen as early as 11 AM Sunday so call now.