The divide between the Obama administration and healthcare insurance agents over an exemption for agent commissions from the medical loss ratio is likely to remain for some time.
Absent congressional action, which seems unlikely at the moment, the consensus of analysts and others is that the Department of Health and Human Services (HHS) lacks the authority to exempt agents from the MLR even if it desires to do so.
Wes Bissett, senior outside counsel for the Independent Insurance Agents and Brokers of America (IIAB), contends that HHS the has the authority to provide such relief under the existing provisions of the healthcare reform law, the Patient Protection and Affordable Care Act (PPACA).
In comments after a divided NAIC voted 26-20 to support the agents on November 20, Bissett said that HHS can act pursuant to its existing authority by (1) recognizing, in the words of the NAIC resolution, "the NAIC's finding that a significant portion of insurance producer activities are dedicated to consumer advocacy and service" and therefore (2) "classifying an appropriate portion of producer compensation as a health care quality expense for purposes of the [ACA]."
Bissett said that the NAIC "perspective on MLR issues is vitally important and relevant," especially since the PPACA empowers the organization to determine (subject to HHS's certification) how the MLR calculations should be performed.
Bissett said that over the last year, the NAIC gathered considerable testimony regarding the health insurance market and concluded that agent and brokers provide valuable advocacy and service in a manner that affects and improves health care quality.
He said that, "Although 100% of agent compensation is currently classified as a negative in the MLR equation, HHS has the authority under existing law to unilaterally provide relief and reclassify some percentage of producer compensation as a positive under the MLR formula."
Bissett added that, "Whether they will elect to do so is a question that remains unanswered, but the nation's insurance regulators have now gone on record and asked HHS to take 'immediate action'."
The resolution was approved by the NAIC in plenary session Nov. 22, 26-20.
It passed after a nearly 90-minute conference call, and two prior unsuccessful, yet strong, attempts to either amend it, mitigate its demands or to send it back to committee.
The resolution also says Congress "should expeditiously consider legislation amending the MLR provisions."
But, almost half of state regulators participating in the conference call voiced opposition, with the most vocal ones stating the political gambit here by the NAIC would ruin its credibility in Washington.
According to a healthcare industry analyst and the California insurance commissioner, HHS has no legal authority to exempt agent commissions from the MLR, as the resolution suggests.
Ira Loss, a healthcare analyst at Washington Analysis, which advises institutional investors and hedge funds, said the change would need Congressional action because the statutory definition of MLR does not allow those commissions to be exempt.
Loss, a healthcare lawyer, later said he has talked with other analysts and lawyers who said he was correct.
Significantly, HHS said after the vote that it plans no immediate action.
"The Affordable Care Act works to put consumers first by establishing greater transparency and accountability in health insurance and ensures that Americans receive value for their premium dollar," HHS said in a statement attributed to a spokesperson. The statement said that the MLR rule does just that.
The spokesman said that, "This new rule provides consumers with meaningful information on how their premium dollars are spent, clearly accounting for how much money goes toward actual medical care and activities to improve health care quality versus how much money is spent on administrative expenses like marketing, advertising, underwriting, executive salaries and bonuses. It is already saving consumers millions by changing the way that insurance companies set premium rates."
Moreover, the spokesman said, "Agents and brokers play an essential role in the insurance marketplace and we have implemented the law in a way that has maintained consumer access to their services."
He said HHS will review NAIC's recommendations and continue to work with them as well as consumer groups and other stakeholders to make sure that consumers receive the full benefit of the medical loss ratio rule."
And, in a statement after the vote, Dave Jones, the California commissioner, said HHS "lacks the authority to take action and for the Congress to make changes to the federal law that would increase the cost of health insurance."
And, in statements in September on the issue, Steve Larsen, director of the Center for Consumer Information and Insurance Oversight said that he believed insurance companies are taking advantage of the MLR to do what they wanted to do anyway: cut producer commissions.
Larsen made these comments in testimony before the House Energy and Commerce Subcommittee on Health.
He said requiring health plans to spend at least 80% of premiums on medical care costs "is a boon to consumers."
He also cited studies from the U.S. Government Accountability Office and others indicating evidence of a reduced growth in insurance premiums.
