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MLR Caps Still a Big Issue

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August will be a crucial month for insurance agents seeking to preserve their relatively large commissions on the sale of small health insurance policies.

Officials of several agents’ groups have confirmed that they are negotiating with state insurance commissioners, who are playing a key role in implementing the new healthcare law.

Officials of the trade groups met with seven insurance commissioners who were attending meetings of the NAIC’s Health Insurance and Managed Care Committee and subgroups in Washington, D.C., according to several industry officials.

They are crafting provisions of the Patient Protection and Affordable Care Act that by law become effective Sept. 23.

The NAIC is drafting them, and will play key roles in implementing them, but they still must be approved by the Department of Health and Human Services, according to the law.

The agents’ groups are seeking some form of exemption for their commissions from a provision of the healthcare reform law, the Patient Protection and Affordable Care Act.

The provision, Sec. 2718 of the bill mandates that 85 percent of healthcare premiums be allocated to actual care, and that administrative costs be limited to 15 percent of premiums.

In their meetings with the seven commissioners, representatives of the agents’ groups have proposed a compromise designed “to find a pathway that ensures “our members can continue to make a living,” according to one lobbyist involved with the talks.

“Crunch time will be August,” confirmed one lobbyist. And, the lobbyist said, “talks are at a delicate stage.”

They are pointing to the request already submitted to HHS for a waiver of the MLR mandate by Maine Insurance Superintendent Mila Kofman.

In her petition to HHS, Kofman argued that at least one of the state’s two insurance companies would likely leave the individual market if the law is implemented. “[A]bsent a waiver, I believe that the federal MLR standard may disrupt our individual health insurance market,” Kofman wrote in a letter to HHS.

Citing the Kofman request, another lobbyist for an agents’ group said, “It is telling that even before the regulation is implemented, that a state is seeking a waiver.”

He added, that, “We are seeking a way of dealing with the commissioners in such a way as to allow them to adhere to the law without throwing the baby out with the bath water.”

Talks have been underway for several months, and the agents’ industry joined together in a June letter to the NAIC that warned of the fragile nature of the small group and individual market and the key role agents play in serving the small and individual markets, which in some cases provide commissions of up to 20 percent of premiums.

“Our organizations are concerned because the draft definition has so far failed to account for the wide spectrum of insurer activities that contribute to better health outcomes and care delivery efficiency,” the letter said.

“We fear the adoption of a narrow and static definition will adversely impact spending on certain important health plan activities,” the letter added.

“If the definition is improperly crafted, discourages or precludes the development of new innovations over time, or excludes activities that both improve care quality and also help contain treatment costs, then the quality of care delivery will deteriorate and costs will surely increase,” the letter said.

Diane Boyle, vice president of government relations for the National Association of Insurance and Financial Advisers, confirmed that the “medical loss ratio is critical.”

She said that, “We want to make sure that the MLR ratios continue to allow for competition in the marketplace and we have seen some early warning signs, like Ccommissioner Kaufman out of Maine, asking for a waiver because of some of her concerns about companies exiting the marketplace.”

“That is what we want to ensure: That carriers don’t exit a marketplace, there is continued competition. and that consumers have access to quality services,” she said.

“We are fearful that the MLR will be defined too narrowly,” she said, acknowledging that this is a pocketbook issue for agents.”

Ms. Doyle said one suggestion being made by agents’ groups is that the implementation date for the MLR be pushed back to 2014, when individual mandates and other major provisions of the legislation must be implemented.

“That would help because you would have the individual mandate in place, where now you have the MLR going into effect before individuals are required to have coverage,” she said.

Nicole Allen, vice president of industry affairs at the Council of Insurance Agents and Brokers, said the CIAB is worried about the fact that we remain concerned with the last draft of the proposed blank, the form insurance companies use to report their financial information to the NAIC.

It is the form that will be used for reporting on this issue. It is a detailed, 40-page form.

“There needs to be flexibility in the standards used to define expenses for improving healthcare quality,” she said.

“The NAIC has taken a list-based approach rather than a functional approach, which means that if something is not specifically listed, it is not acceptable,” Allen said. “It basically says that, ‘if you are not included above, you do not count as a covered activity.”

Allen said the current version of the “blank” constitutes “Very narrow definitions and we are afraid that it will discourage activities that could have a positive impact on quality improvement,” citing wellness, and health prevention activities in connection with insurers. Our members do a lot of that.”


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