Action Requested on MLR

If the National Association of Insurance Commissioners (NAIC) has its way, agents should see some relief from the impact of the Medical Loss Ratio (MLR) provision of the Patient Protection and Affordable Care Act.

The NAIC hasn’t gone so far as to ask Congress to remove agent compensation from the calculation of the MLR, but it has asked the Department of Health and Human Services (HHS) to consider the adverse effects of the MLR on agents/brokers and make changes.

Under the MLR provision, insurers must spend 80 to 85 cents of every premium dollar on health care services and 15 to 25 cents on administrative costs, depending on whether they’re insuring individuals, small groups or large groups. Currently, agent commissions are included in administrative costs.

The Independent Insurance Agents & Brokers of America (IIABA or Big “I”) would like to see agent compensation removed from the MLR calculation altogether. Agents say that reduced compensation to agents and brokers will hurt consumers. The MLR provision already has had a negative effect on agencies.

“The impact of the medical loss ratio has been dramatic on the agents and brokers in this country and it was dramatic immediately,” Beth Ashmore, an independent insurance agency owner from Lubbock, Texas, and a health care insurance and employee benefits specialist, told state insurance commissioners at an NAIC meeting in Austin last spring.

The NAIC recently adopted a resolution asking the HHS to mitigate the adverse effects of the MLR rule with respect to agent and broker compensation by (1) approving state MLR adjustment requests, (2) suspending implementation and enforcement of MLR requirements relative to agent and broker compensation, and/or (3) classifying a portion of agent and broker compensation as a health care quality expense.

Not all state insurance commissioners were in favor of the resolution, 26 voted for it, 20 voted against it and four abstained.

“The impact of the MLR provision on agents and brokers’ ability to serve consumers has been the subject of extensive debate among regulators and there is clearly not unanimous agreement on this issue,” acknowledged NAIC President and Iowa Insurance Commissioner Susan Voss. “However, the resolution follows up on concerns consistently raised by the NAIC since passage of the Affordable Care Act.” She added that it “specifically asks HHS to take action through its rule-making process to help preserve consumer access to insurance agents and brokers.”

Applauding the NAIC’s action, Big “I” President and CEO Robert Rusbuldt said, “If the MLR formula is not corrected soon, consumers will suffer the prospect of losing the professional, licensed guidance of insurance agents during this time of great change in the health insurance market.”