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Agents Commissions Still in Question Following NAIC Approval of MLR

An amendment to allow agent commissions to be excluded from medical loss ratio (MLR) calculations ended up not being offered by the National Association of...
October 27, 2010

An amendment to allow agent commissions to be excluded from medical loss ratio (MLR) calculations ended up not being offered by the National Association of Insurance Commissioners (NAIC), during the group's plenary session in Orlando on October 21.

Prior to the action, more than 13 commissioners had signed on in support of an amendment, subsequently withdrawn by Commissioner Mike Bertrand (VT), that would have treated agent commissions as a "pass-through" outside the MLR. The NAIC then forwarded its complete MLR recommendations to Health and Human Services (HHS) Secretary Kathleen Sebeilus, as required by law. The NAIC was charged with developing medical loss ratio recommendations under the Patient Protection and Affordable Care Act (PPACA), the federal health reform law.

What remains unclear at this point is exactly how agent commissions will be treated.

"HHS Cannot be Trusted" Regarding Agents: Chaney

Commissioner Bertrand withdrew his agent commission amendment in exchange for a commitment from NAIC leadership that they will work diligently with HHS to find a solution to the agent commission issue. To this end, Director Mary Jo Hudson (OH) moved to establish a special subgroup to work with HHS on agent compensation. The motion was seconded by Roger Sevigny (NH) and passed unanimously.

Commissioner Mike Chaney (MS) stated flatly that "HHS cannot be trusted on MLR with respect to agents." He also said that "regulators cannot be put in the position of selling insurance" and "we're looking at a train wreck if we don't have input to HHS." Commissioner Chaney said he has a legal brief that says NAIC can adjust MLR to take into consideration agent commissions. Commissioner Jane L. Cline (WV) said that the amendment would conflict with proposals already submitted to Health and Human Services and there is uncertainty whether the NAIC has the authority to propose an exemption for agents.

Cline said the NAIC has sent a letter of support to HHS underscoring the important role agents and brokers play in the sale of health insurance and educating policyholders and assured everyone that they are committed to working with HHS on this issue. "We are extremely committed to working with the agent community as we work to find a resolution; and we all recognize the importance of the agent community to advise consumers and help them make informed decisions," Commissioner Cline said.

"While we are disappointed that the NAIC decided not to proceed with the 'pass through' recommendation, we appreciate the expressions of continuing support agents have received," said PIA National in a statement. "Considering the number of commissioners who supported the 'pass through' proposal, and subsequently voiced strong support for finding a solution on the agent commission issue by unanimously creating a special sub-group of the NAIC's executive committee, we will continue to work with the NAIC, HHS and carriers to ensure that agents who provide vital services to health insurance consumers will continue to be compensated fairly."

What It Means to Agents: The issue of agents' and brokers' commissions in the sale of health insurance policies through the newly-established health insurance exchanges remains to be resolved. PIA will remain actively involved in order to protect and defend the right of our members to be fairly compensated for their services.

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