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Obama Official: MLR Didn't Cause Commission Cuts

An Obama administration official told a congressional hearing that the current medical loss ratio (MLR) regulation is not a punishment for agents and brokers. While...
September 20, 2011

An Obama administration official told a congressional hearing that the current medical loss ratio (MLR) regulation is not a punishment for agents and brokers. While denying that including agents and brokers in MLR calculations is causing commission cuts, Steve Larsen, director of the Center for Consumer Information and Insurance Oversight, said health insurance companies may be taking advantage of the Affordable Care Act and MLR rules to do what they wanted to do anyway: cut producer commissions. Agent and broker commissions are counted as administrative expenses under the MLR rule.

Language in the Affordable Care Act makes clear that agents are to be included in the healthcare delivery system that the legislation sets up. But being included and getting paid can be two different things. The Department of Health and Human Services (HHS), in preliminary regulations, included producer compensation in the calculation of medical loss ratios (MLR) that limit administrative expenses to 15 percent or 20 percent. As a result, many agents across the country tell us this has led to their carriers cutting their compensation by as much as 50 percent.

"HHS is attempting to use the regulatory process to overturn the clear intent of Congress to include agents and brokers as full participants in the delivery of health insurance under the Affordable Care Act," said Mike Becker, assistant vice president of federal affairs for PIA National. "The Administration should be seeking to ensure that consumers have unfettered access to licensed insurance professionals to assist them, rather than erecting barriers. Congress needs to again make its position clear by passing H.R. 1206."

What It Means to Agents: Here we have an Obama administration official denying responsibility for the fact that its policies caused cuts in agent commissions by saying those policies allowed companies to do what they wanted to do anyway.  That's bogus. The real message to producers is, "tough luck, it's not our fault but we support cutting your compensation." This is why PIA has endorsed and is lobbying for passing H.R. 1206, the Professional Health Insurance Advisors Act of 2011. The bill would take this matter out of the hands of HHS and require that producer compensation be calculated outside the MLR. This is also why PIA has criticized the decision by the NAIC Executive Committee to ignore the recommendation of its own task force that it endorse H.R. 1206. We hope the full NAIC plenary reverses that decision.

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