PPACA: NAIC Panel Backs MLR Measure

WASHINGTON BUREAU — The Professional Health Insurance Advisors Task Force at the National Association of Insurance Commissioners (NAIC) has endorsed H.R. 1206, a U.S. House bill that calls for removing agent commissions from medical loss ratio (MLR) calculations.

Task force members decided to support the bill Thursday during a conference call. Caduceus

The NAIC formed the task force in November 2010. The head of the task force, Kevin McCarty, the Florida insurance commissioner, declined to comment on the task force recommendation.

Jane Cline, the West Virginia commissioner, voted against supporting the bill, and Wayne Goodwin, the North Carolina commissioner, abstained.

The NAIC executive committee must consider the issue before the NAIC as a whole can give H.R. 1206 official support.

The Patient Protection and Affordable Care Act of 2010 (2010) requires health insurers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts.

The U.S. Department of Health and Human Services (HHS) has issued interim regulations that would classify producer compensation as an administrative expense.

Producers have argued that their compensation should be excluded from the calculations because customers are the ones who pay the commissions. Insurers collect the commissions as a courtesy to the customers, producers say.

Producer groups have reported this year that insurers are cutting individual and small group commissions

50% this year and attributing the changes to the new MLR rules.

Rep. Mike Rogers, R-Mich., the primary sponsor of H.R. 1206, said recently at a House hearing that health insurance agents and brokers will continue to be in a desperate situation unless Congress acts to change the MLR provision in the HHS regulation.

Consumer groups have sent the NAIC task force a letter asking the task force and the NAIC as a whole to support the current HHS regulation.

"Data about the extent of commission changes and their causes are inconclusive, suggesting that amending federal law is unwarranted," the coalition says in the letter.

"No evidence has been presented to indicate that consumers have lost access to brokers" as a result of the new MLR policy, the coalition says.

Figures presented by National Association of Health Underwriters (NAHU), Arlington, Va., to the NAIC's Health Insurance and Managed Care Committee regarding producer compensation "illustrate that many carriers have not altered commission levels between 2010 and 2011, and some have actually increased commissions," the coalition says.

The NAHU data showed that, "to the extent that reductions in commissions have occurred, in general it appears the main impact has been on very high first-year commissions in some states; commissions have by and large been reduced in high-commission states to levels typically found in lower-commission states, and high-paying insurers have cut commissions to levels paid by their competitors," the coalition says. "Widespread reductions across the country and all plans were not apparent."

The coalition says information about California compensation levels included in a supplemental data section "demonstrates that producer commissions have increased very dramatically in recent years and suggests that recent changes in compensation may in fact represent a market correction rather than an unreasonable reduction in income."

Reactions

McCarty has put out a statement welcoming the advance of the H.R. 1206 endorsement measure.

In the 6 months since the MLR requirements have become effective, 13 states have filed MLR waiver requests with HHS because of concerns about the effects of the requirements on the individual health insurance market, McCarty says.

"We are also monitoring a national trend of changes in agent compensation by insurance companies to meet these requirements," McCarty says. "This has created a serious concern that lower agent commissions could encourage agents to leave the marketplace precisely when they are needed most."

Consumers need agents' help to find the best products for their families, McCarty says.

NAHU Chief Executive Janet Trautwein and Terry Headley, president of the National Association of Insurance and Financial Advisors (NAIFA), Falls Church, Va., have welcomed the decision of the NAIC task force to support the bill.

Trautwein has issued a statement asking the NAIC executive committee to move promptly to endorse the bill and urging HHS officials to delay enforcement of the MLR regulations.

Headley says the NAIC task force move shows that the task force understands how the MLR rule is hurting small businesses and insurance customers.

"If someone has difficulty understanding their coverage or deciding what coverage is right for them or if they have trouble filing a claim, they can turn to their broker for help," Headley says. "The MLR rule, as it exists today, marginalizes the role of professional insurance advisors."

Ethan Rome, executive director of Health Care for America Now, Washington, says the NAIC advisors task force has "acted like a wholly owned subsidiary of the health insurance industry."

"They did exactly what the industry wanted by voting to gut one of most significant provisions of the Affordable Care Act that holds the insurance companies accountable," Rome says in a statement.

PPACA "is about protecting small businesses and consumers who have been beaten up and overcharged for decades, but today the NAIC got it backwards," Rome says. "It's repugnant that they would steal $1.3 billion from consumers and small businesses and hand it over to the insurance companies."