A Balancing Act

When it comes to health insurance reform, it seems that where you’re coming from makes all the difference.

Illinois Insurance Director Michael McRaith, President Obama’s pick to head the Federal Insurance Office and a leader in implementing provisions of the national healthcare overhaul in his state, said the Affordable Care Act passed by Congress last year is helping consumers. McRaith said the requirement in the law that says insurers must spend 80 to 85 cents of every premium dollar on providing health care — or give rebates in 2012 — will end up providing some consumers with extra money next year. McRaith predicts up to 20 percent of Illinois policyholders in the individual market and about 25 percent of small group policyholders could get rebates.

But that requirement, called the Medical Loss Ratio (MLR), greatly concerns insurance agents as their commissions for selling health insurance policies are included in the 15 percent to 20 percent cap on administrative costs. Agents and brokers say that insurers are likely to reduce their commissions as a result of the mandate, and indeed are already doing so.

One Texas agent who specializes in employee benefits and group health policies said some companies have reduced commissions dramatically — as much as 50 percent in some cases — in anticipation of the MLR provision. The situation is already dire, she said. If commission cuts continue, agents will be unable to provide the services after the sale of the policy that health plan consumers need, especially small businesses and individuals.

At a National Association of Insurance Commissioners hearing on the MLR in Austin, Texas, on March 27, insurance commissioners across the United States made it clear they are sensitive to agents’ concerns and see agents as valued partners in guiding consumers through the complicated health insurance landscape.

The NAIC has to balance the benefits of the MLR for consumers and its negative effect on agents. They came to no conclusion as to whether removal of agent commissions from MLR calculations as proposed in the Access to Professional Health Insurance Advisors Act of 2011 (H.R. 1206), sponsored by Reps. Mike Rogers, R-Mich., and John Barrow, D-Ga., would be harmful to consumers. The commissioners did, however, decide to act swiftly on an evidence-based solution to the problem. A report is due to the NAIC from health insurers on April 1 that identifies the amount companies pay in commissions. Commissioner Kevin McCarty of Florida, who chaired the meeting, said a status update based on that report and other data should be completed within four to six weeks of the March 27 hearing.