WASHINGTON—A controversial provision in the health care reform law dealing with the treatment of agent and broker commissions could lead to a shrinkage of the health insurance marketplace.

Speaking at the Council of Insurance Agents & Brokers' Legislative Leadership Conference in Washington on Wednesday, Sen. Susan Collins, R-Maine, targeted the medical loss ratio provision of the Patient Protection and Affordable Care Act as a particular problem.

The provision requires insurers underwriting individual and small-group coverage to spend at least 80% of their premium revenues on medical care, while insurers providing coverage to large groups must spend at least 85% on medical care. Insurance agents and brokers have called for changing the provision to exclude their commissions from calculating insurer's medical loss ratios.

Sen. Collins said if the provision remains intact, smaller insurers would find competing with their larger counterparts more difficult. That would lead to a shrinking of the market, which could in turn lead to higher prices.

The senator, who voted against the health care reform law, said she wondered “in my more cynical hours” whether the law was designed to destroy the employer-based health care benefits system and replace it with a single-payer system.

Later in the day, Rep. Ed Royce, R-Calif., also endorsed the repeal of the medical loss ratios. Rep. Royce had voted to repeal the law this year, and told his audience that Republicans would offer an alternate bill. He called the medical loss ratio provision “just another example” of the federal government imposing price controls on an industry.

Sen. Collins said lawmakers had missed a “tremendous opportunity” to work on a truly bipartisan measure that would have focused on cost control. Such a focus would have included medical liability reform, she said.

“Obviously, we are not going to see the repeal of the law unless the courts strike it down, which is a possibility,” she said. As a result, lawmakers have to continue their efforts to improve it, she said.

Another speaker, Rep. Jim Himes, D-Conn., was asked how the law could be improved.

“We probably could have been more thoughtful on liability reform,” he said.