You are here:HomeIssuesHealth Care Reform2011Commission Cuts Hitting Health Agents Hard

Commission Cuts Hitting Health Agents Hard

Cuts in commissions paid to agents and brokers selling health insurance are continuing to hit hard. Ever since preliminary regulations were issued by the Department...
May 3, 2011

Cuts in commissions paid to agents and brokers selling health insurance are continuing to hit hard. Ever since preliminary regulations were issued by the Department of Health and Human Services (HHS) designed to implement the new healthcare law, producer compensation has taken a hit. HHS regulations counted producer compensation within medical loss ratio (MLR) administrative expenses that are limited to 15% or 20% under PPACA.

PIA is pushing to have producer compensation exempted from the MLR calculations. We are pressing the National Association of Insurance Commissioners (NAIC) to recommend to HHS that it exempt agent and broker commissions from the MLR calculations when it issues final regulations later this spring. Separately, PIA has endorsed H.R. 1206, the Professional Health Insurance Advisors Act of 2011. The legislation sponsored by Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) clarifies that producer compensation will not be considered as part of MLR - taking the matter out of the hands of HHS.

One stumbling block at the NAIC to resolving this is Illinois Commissioner Michael McRaith, who is openly unsympathetic to the position of agents and brokers. In an interview, McRaith said there doesn't need to be regulatory action or a law "just to pay agents and brokers," adding that "The insurance companies can already afford to make those payments. They have chosen not to." McRaith has also expressed skepticism that declines in commissions are attributable to the MLR; his requests for more data have served to slow any NAIC action on the issue. McRaith will become director of the new Federal Insurance Office (FIO) in June.

Meanwhile, a poll of 520 member agents and brokers who sell and service health insurance policies, conducted by the National Association of Insurance and Financial Advisors (NAIFA), showed that 75 percent have seen their commissions decrease since the MLR went into effect. Another 13 percent say they have been notified by insurance companies that commissions will be cut in the near future. More than half of the agents reported that their commissions have been lowered by 25 percent or more, which includes 17 percent who say their companies have cut commissions in half or more.

Filed under: