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Opposition to HHS Rule on Agents in MLR Grows

Grassroots opposition is building around the country to federal action that threatens the ability of agents and brokers to continue selling health insurance
January 17, 2012

Grassroots opposition is building around the country to federal action that threatens the ability of agents and brokers to continue selling health insurance.

When Congress passed the healthcare reform law in 2010, agents succeeded in getting language inserted in the bill stating that agents and brokers will be full participants in the new system.

Under the new law, insurers had to commit at least 80% of individual and small-group premiums and 85% of large-group premiums to medical costs, leaving the remainder for administrative costs. The federal Department of Health and Human Services (HHS) then issued a regulation saying agent and broker commissions must be calculated as administrative expenses within the medical loss ratio (MLR), which is limited to 15% or 20% of premiums.

The upshot has been that many agents have seen their compensation from health insurers decrease by as much as 50% since the MLRs went into effect Jan. 1, 2011, according to the nonpartisan Government Accountability Office (GAO).

Efforts to counter the HHS rule by either getting the agency to change it, or getting Congress to pass a law requiring that agent compensation be calculated outside the MLR, are gathering steam across the nation.

In Ohio, Lieutenant Gov. and Department of Insurance Director Mary Taylor recently co-sponsored a resolution urging members of Congress and the U.S. Department of Health and Human Services to change federal law that would harm agents and brokers who sell health insurance. She called attention to her action by issuing a guest column which is a ringing endorsement of the value of agents and brokers. An excerpt:

“The Department of Insurance will continue to focus on consumers while protecting Ohio’s competitive insurance market place so consumers have choices of coverage.  Part of those efforts must include the continued support of Ohio’s agents and brokers.  Individual and small business consumers deserve a good product at a fair price no matter what insurance they have.  Your local agent or broker can help you understand your options and give you the tools to make the most beneficial choice for you, your family, and your business.” Read the full article here.

“This is such a positive step by ODI, and will help us improve the perception of owning or working in an agency as a career. Insurance is the fourth largest industry in Ohio, and we need to attract and retain the qualified employees to grow,” said PIA of Ohio Executive Vice President George Haenszel, CAE. “Thank you to the Kasich Administration and Director Taylor for their continued commitment to this endeavor.”

In Florida, Insurance Commissioner Kevin McCarty is continuing the work to free agent commissions from the death grip of the MLR. McCarty – who is president of the National Association of Insurance Commissioners (NAIC) this year – got the NAIC in December 2011 to urge HHS to exempt agent commissions from the MLR. HHS rejected the request a few days later. Working with agents in Florida, McCarty has formally petitioned HHS to reconsider.

In Maryland, a group tasked with implementing federal healthcare reform is recommending that insurance agents and brokers continue to sell small-group health insurance when health exchanges begin operating in the state. The recommendations were made by the Maryland Health Benefit Exchange, which was set up under Maryland law to help implement the exchanges. Read more here.

PIA supports the Professional Health Insurance Advisors Act of 2011 (H.R. 1206), a bill that would clarify that producer compensation will not be considered as part of the MLR and would take that decision completely out of the hands of HHS.

See Ohio DOI's statement on the importance of agents: Agents and Brokers Serve a Vital Role for Consumers (Ohio DOI 1/9/12)

Read more on the MLR provision: Agents, Carriers Say Provision Hurting Business (Tampa Bay Times 1/6/12)

Read how MD is setting up its health exchange: Maryland Says Use Agents, Brokers in Health Exchange (Ins. & Financial Advisor 1/6/12)

Read PIA's statement on NAIC's MLR inaction: PIA Expresses Disappointment at HHS Rejection of NAIC Input on MLR (PIA 12/5/11)

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