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NAIC Delays Action for Four Weeks on Agent/Broker Commissions & MLR

After more than three hours of debate, a task force of the National Association of Insurance Commissioners (NAIC) decided to delay for at least four...
March 29, 2011

After more than three hours of debate, a task force of the National Association of Insurance Commissioners (NAIC) decided to delay for at least four weeks a decision on whether to endorse a federal bill that would exempt commissions paid to insurance agents and brokers from the medical loss ratios required under the Patient Protection and Affordable Care Act (PPACA).

The Professional Health Insurance Advisers Task Force opted to refer the issue back to the Health and Managed Care Committee to collect more data on the matter.

PIA spoke at the public hearing and provided written comments, noting that Congress specifically included participation by agents in the newly designed healthcare system. After the hearing, PIA expressed disappointment with the delay and reaffirmed its endorsement of the Access to Professional Health Insurance Advisors Act of 2011 (H.R. 1206).

"PIA is disappointed that the task force opted to delay action," said PIA National Assistant Vice President for Regulatory Affairs David Eppstein, who represented PIA at the hearing. "There is already ample evidence that agent and broker compensation has been negatively affected as a direct result of HHS's failure to exclude it from MLR calculations. We are hopeful that the Health and Managed Care Committee, chaired by Commissioner Praeger, will act quickly to allay any concerns and that the NAIC will just as quickly endorse legislation to remove producer compensation from medical loss ratio calculations."

Task force chairman Kevin McCarty, Florida's insurance commissioner, gave the Health and Managed Care Committee, chaired by Kansas Insurance Commissioner Sandy Praeger, four weeks to collect data on whether MLRs were responsible for the reduced commissions agents and brokers have said they have received in the wake of the healthcare law's passage.

The delay comes as H.R. 1206, sponsored by Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.), has been introduced in the House. The 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. Agents have been experiencing cuts in commissions after the federal Department of Health and Rehabilitative Services (HHS) failed to exclude producer compensation from medical loss ratio calculations.

McCarty said this is a case where the NAIC needs to move quickly. "Time is of the essence. This isn't a partisan issue. It's an important issue to the agents and brokers who provide such valuable services to the consumers. We can't afford to let this languish."

Many of the more than 30 commissioners who attended the hearing appeared to agree that swift action was needed on the issue, but some expressed concern that the NAIC might be moving too quickly. Connecticut Insurance Commissioner Thomas Leonardi said if the NAIC endorses H.R. 1206 too quickly without vetting the relevant data, "then I think we run the risk of diluting our own reputation."

New FIO Head Skeptical

Illinois' insurance commissioner Michael McRaith, who will soon take over as director of the new Federal Insurance Office (FIO) expressed skepticism, saying that there was little evidence that it was MLRs driving insurers to cut agent and broker commissions. McRaith said that the "problem" could be that insurance premiums have risen steadily during the past decade and commissions may have risen accordingly.

In written testimony submitted to the task force in advance of the hearing, PIA said Congress specifically included licensed insurance agents and brokers as an integral part of the healthcare law and that HHS should not be permitted to undermine that expressed congressional intent.

"Agents were included because the legislators recognize the value agents provide to consumers in helping make important decisions regarding their health risk management," PIA said in its testimony. "We don't believe HHS (the federal Department of Health and Human Services) should be allowed to exclude agents from the marketplace through regulation, especially when the underlying legislation specifically included agents. The role of the health agent is indispensable for many, especially as a myriad of new options becomes available to consumers," PIA stated.

Read the NAIC Panel Seeks More MRL Info article (PIA comments) (National Underwriter 3/28)

Read PIA's Comments to NAIC On MLR (press release 3/21/11)

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

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