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Average MLR Reaches 92 Percent

It is no longer necessary for the Department of Health and Human Services (HHS) to classify agent compensation as an “administrative expense.”
November 3, 2015

Insurers spent an average of 92 percent of individual health plan premiums on patient care in 2014, exceeding thresholds set by the Affordable Care Act’s (ACA’s) medical loss ratio (MLR) requirements, according to a new Urban Institute report. Prior to the ACA’s 2010 implementation, the average MLR for all insurers in 29 states fell below the 80 percent figure—but by 2014, every state had an average MLR at or above 80 percent, the report says. The report used data sent by insurers to the National Association of Insurance Commissioners (NAIC).

What It Means to Agents: The ACA requirement that insurance companies spend at least 80 or 85 percent on patient care was used by some as an excuse to drastically cut agent commissions. Now that the average MLR has reached 92 percent, it is no longer necessary for the Department of Health and Human Services (HHS) to classify agent compensation as an “administrative expense” under the MLR.

PIA has endorsed the Access to Professional Health Insurance Advisors Act of 2015 (H.R. 815), which was introduced by Rep. Billy Long (R-Mo.) and Rep. Kurt Schrader (D-Ore.). The legislation clarifies that producer compensation will not be considered as part of medical loss ratio (MLR) calculations under the Affordable Care Act (ACA). Congress needs to pass H.R. 815 now.

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