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McRaith: Companies, Not Regulators to Blame for Reductions in Agent Compensation

Illinois Insurance Director Michael McRaith told BestWire that health insurance carriers themselves should ante up to ensure broker commissions aren't affected by the sweeping changes...
April 19, 2011

Illinois Insurance Director Michael McRaith told BestWire that health insurance carriers themselves should ante up to ensure broker commissions aren't affected by the sweeping changes facing the health insurance industry. McRaith said he was skeptical of the need for legislation such as the bill introduced last month by Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) which would exempt broker commissions from medical loss ratio (MLR) calculations. PIA has endorsed the Rogers-Barrow bill.

"We don't need a law, we don't need an amendment to the Affordable Care Act, we really don't need regulatory action and to further burden consumers with higher, increased premiums just to pay agents and brokers," McRaith, who is about to become director of the Federal Insurance Office, said in an interview with BestWire. "The insurance companies can already afford to make those payments. They have chosen not to." He also expressed skepticism that National Association of Insurance Commissioners (NAIC) needs to endorse the Rogers-Barrow bill without a clear indication that MLRs were actually responsible for declining broker commissions. The NAIC currently has a task force investigating the MLR issue that is due to report by the end of this month.

"The health insurance companies have created the problem," McRaith said. "The health insurance companies should solve the problem," McRaith said. "I don't believe the regulatory community or Congress should be called upon and to salvage further billions in surplus at further expense to the consumers."

What It Means to Agents: Mr. McRaith previously described as a "problem" that insurance premiums have risen steadily during the past decade and commissions may have risen accordingly. Now he says no action should be taken on MLR "just to pay agents and brokers." These comments do not bode well coming from the person who will soon take over as director of the new Federal Insurance Office (FIO).

This problem was not created by the health insurance companies, it was created when the federal Department of Health and Human Services (HHS) issued preliminary regulations that failed to exclude agent and broker compensation from medical loss ratio (MLR) calculations. That put immense downward pressure on commissions. The NAIC failed to stand up for agents and brokers when it did not recommend to HHS that this compensation be calculated outside of the MLR.

Placing the blame on the insurance companies completes a circle of finger-pointing, where all the parties blame each other and then use that as an excuse to do nothing. Since this is the game that's being played here, there are two ways to break this circular evasion: First, the NAIC needs to stand up for agents and brokers with solid action to accompany their words of support. This means recommending HHS remove producer compensation from MLR when it issues final regulations.

Second, Congress should pass and the President should sign the Access to Professional Health Insurance Advisors Act of 2011 (H.R. 1206). This bill clarifies that producer compensation will not be considered as part of medical loss ratio (MLR) calculations under the healthcare reform law enacted last year. This takes the matter out of the hands of HHS.

"Congress specifically included licensed health insurance agents and brokers as an integral part of the healthcare delivery system under Patient Protection and Affordable Care Act," said PIA National Director of Federal Affairs Mike Becker. "PIA believes that HHS should not be permitted to exclude agents from the marketplace through regulation, especially when the underlying legislation specifically included agents."

Read PIA's comments in PIA Files Comments With NAIC On MLR (press release 3/21/11)

Read PIA's Comment Letter on MLR to NAIC (3/21/11)

Read agent compensation article on MLR Dramatically Impacting Commissions, Agents Say (Insurance Journal 4/18/2011)

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