The National Association of Insurance Commissioners should not think about producer compensation when implementing the new federal minimum loss ratio requirements, according to Birny Birnbaum.
The new minimum MLR provision, part of the federal Affordable Care Act, will require large group insurers to spend 85% of premium revenue on health care and health improvement costs starting in 2011. Issuers of individual and small group policies will have to spend 80% of premium revenue on health care and health improvement costs.
ACA — the legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act – puts the NAIC, Kansas City, Mo., in charge of helping the states develop standard minimum MLR implementation rules.
The Medical Loss Ratio Regulation Work Group at the American Academy of Actuaries, Washington, wrote to the U.S. Department of Health and Human Services in May and suggested that overly strict individual market MLR rules could reduce the availability of individual health insurance, in part by reducing the commissions that give agents an incentive to sell health insurance.
Agent groups also have encouraged the NAIC and HHS to think about the possible effects that tough MLR rules might have on agent commissions, and the effects lower agent commissions might have on health insurance sales.
“This argument is based on the insurance industry conducting business as usual,” according to Birnbaum, executive director of the Center for Economic Justice, Austin, Texas.
Congress passed PPACA and HCERA because of a belief that the health insurance insurance needs to change, Birnbaum writes in a comment letter sent to an NAIC PPACA actuarial subgroup.
“There is no rationale for discarding an essential consumer protection — the MLR — because the industry does not want to change its current business model,” Birnbaum writes.