Sidelining Agents

In their zeal to control health care costs, federal and state policymakers may be pushing health insurance agents and brokers to the sidelines and potentially out of business. If this happens, they will be shortchanging the consumers who rely on agents and brokers for access, information and guidance on health insurance matters, now more than ever.

Agents and brokers may be sidelined as their health insurer partners look for ways to comply with the new medical loss ratio (MLR) requirement. The MLR rule is part of the Patient Protection and Affordable Care Act and requires health services providers and insurers to spend at least 80 to 85 percent of premiums on direct patient care claims beginning this year. The intention is to limit insurers’ spending on profits and administration, including executive salaries, overhead and marketing. Calif. Insurance Commissioner Dave Jones recently proposed a state regulation to enforce the MLR rule (See page 10 of this issue).

Following advice from the National Association of Insurance Commissioners (NAIC), the Department of Health and Human Services (HHS) decided what should be considered direct care claims costs that fall within the 80 percent to 85 percent ratio, and what should be non-claims costs that fall outside the medical ratio.

Insurance agents provide important services for consumers not only at the time of the sale but after the sale as well. They believe that their compensation should not be affected by any MLR formula. But the proposed final MLR does not protect agent and broker fees and commissions; these payments are instead classified as non-claims costs.

The NAIC said it recognizes that some insurers may be particularly reliant on producers to sell their products and perform other duties. It also acknowledged that the MLR standard may put pressure on providers that have longer-term compensation deals with agents and brokers. But the MLR regulation only says that the impact on agents and brokers will be a factor in considering a state’s request for an adjustment for a particular individual market.

Agents understandably fear that health insurers looking to stay within the MLR ratio will begin reducing, even eliminating, payments to agents and brokers. It wouldn’t be the first time insurance companies undervalued the role of the advisers who drive their customer relationships.

Although the NAIC has created a task force to monitor the effects on agents and brokers, it’s unclear what good this task force can do at this late stage. Now some brokers are ready to ask Congress to intervene to protect their compensation. Running to Congress may not sit well with some political types, but for agents being forced onto the sidelines, it may be the only play that gets them back in the game.