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CMS Releases Guidance on Agent and Broker Fees Under ACA

The Centers for Medicare & Medicaid Services on Friday issued guidance on when agent and broker fees may be excluded from earned premium in connection with calculating the medical loss ratio...
June 3, 2015

The Centers for Medicare & Medicaid Services (CMS) on Friday issued guidance on when agent and broker fees may be excluded from earned premium in connection with calculating the medical loss ratio (MLR). The MLR is a formula that effectively limits the amount that insurers can spend on administrative expenses. Essentially, the guidance clarifies that commissions can only be excluded from MLR calculations when a consumer retains and pays a fee directly to an agent or broker and the agent or broker receives no compensation from the insurer.

What It Means to Agents: PIA supports excluding agent and broker compensation from the MLR calculation in all instances. Unfortunately under the current regulations, fees paid to agent and brokers are improperly calculated into earned premium and inaccurately classified as administrative costs. The effect of this has caused many agents and brokers to exit the market, effectively limiting consumer access to licensed and experienced health insurance experts.

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