Health care reform rule on commissions draws insurance brokers' fire

Insurance producers want Capitol Hill to exclude their commissions from minimum medical loss ratio calculations.

WASHINGTON—Capitol Hill is the key battlefield as insurance producers attempt to have their commissions excluded from minimum medical loss ratio calculations under the Patient Protection and Affordable Care Act.

PPACA requires health insurers to spend at least 85 cents of every premium dollar collected on health care in the large-group market and 80 cents in the individual and small-group markets.

Agent and broker groups sought to have their commissions excluded from the requirement and hoped that a recent National Assn. of Insurance Commissioners' recommendation backing their stance would bolster their cause.

However, the Department of Health and Human Services dashed those hopes this month when HHS promulgated a final rule that does not carve commissions out of the formula. That leaves Capitol Hill as the best chance to change the MLR calculation.

Rep. Mike Rogers, R-Mich., introduced the Access to Professional Health Insurance Advisors Act of 2011 in March. H.R. 1206, which has 140 co-sponsors, would amend the Public Health Service Act to exclude remuneration paid to licensed independent insurance producers from administrative cost calculations for purposes of calculating the medical loss ratio of a health insurance plan.

The proposal would define an “independent insurance producer” as an “insurance agent or broker, insurance consultant, benefit specialist, limited insurance representative and any other person required to be licensed under the laws of the particular state to sell, solicit, negotiate, service, effect, procure, renew or bind policies of insurance coverage or offer advice, counsel, opinions or services related to insurance,” according to a summary of the bill prepared by the Congressional Research Service.

Although hearings have been held on the issue, the measure has yet to come to a vote and no companion legislation has been introduced in the Senate.

The HHS rule was not unexpected, but nonetheless was dismaying for agents and brokers.

The Washington-based Council of Insurance Agents & Brokers was “disappointed but not altogether surprised” by the HHS announcement, said Joel Wood, senior vp at the council. He said that throughout the NAIC's lengthy debate over whether to support the agent commission carve-out, HHS had indicated an “open-mindedness on flexibility on the issue,” which supporters doubted the department would be flexible on the issue.

He said the council will continue to work with its partners in other producer groups to win passage of the House bill.

“We're going to focus our resources” on H.R. 1206, which has strong bipartisan support in the House,” said Charles Symington, senior vp at the Alexandria, Va.-based Independent Insurance Agents & Brokers of America.

“We're going to continue to work towards adding to that already very long co-sponsor list, and make the case to the leadership of the House that the bill should be moved,” Mr. Symington said. “In the Senate, we're having discussions with Senate offices on potential introduction of either a companion to the House bill or legislation that could differ but could still tackle the problem.”

Mr. Symington said the group will work with HHS in an effort to try to deal with this problem, “but we are very disappointed with their action.”

In a statement issued shortly after HHS' announcement of the final rule on Dec. 2, Mr. Symington said, “HHS completely ignored the NAIC's recently passed resolution in which the commissioners urged HHS to provide agents and brokers with relief from the MLR calculation. This relief is essential in order for consumers to have continued access to the professional services of agents and brokers.”

Meanwhile, a group of consumer groups, labor unions and other organizations sent a joint letter to members of Congress, urging them “to reject legislation that would undermine the critical consumer benefits of the minimum medical loss ratio.” The groups wrote that “these proposals could cost consumers more than $1 billion in lost premium rebates and greatly diminish the ability of the MLR to reduce the growth of health insurance rates.”

The AFL-CIO, Consumers Union and National Education Assn. were among the more 70 signatories of the letter.