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Health Issues Heat Up for Agents

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Congress is expected to take up, as early as this week, a proposed revision to the healthcare reform law designed to limit a stringent tax-reporting mandate scheduled to go into effect in 2012 that is particularly irksome to small businesses.

At the same time, the National Association of Insurance Commissioners and the Department of Health and Human Services must deal this month with several other issues of critical importance to the industry.

One is a request by health insurance agents that agent commissions not be treated as part of company premium revenue for purposes of establishing medical loss ratios under the healthcare reform law.

The law states that administrative costs must be limited to a maximum of 80 percent, and in some cases, 85 percent.

The instructions on the “blank” the NAIC is crafting must be completed this month; the entire proposal must then be submitted to HHS for final approval.

According to officials of the National Association of Insurance and Financial Advisors, the National Association of Health Underwriters and the Independent Insurance Agents and Brokers of America, the industry is lobbying the NAIC to establish agent commissions as a pass-through expense excluded from the MLR calculation.

According to a NAIFA official, agents’ groups are also working to have a rebate transition adopted to allow companies the time necessary to modify their operations in a staged process in order to avoid significant consumer harm. “There are several states where there could be particular concern given current statutory MLR levels and the number of people with individual coverage,” a NAIFA official explained.

The NAIC passed a resolution at its summer meeting supporting a carve-out for agents on the commission issue. The resolution was sponsored by Florida commissioner Kevin McCarty, co-sponsored by 24 other commissioners and passed unanimously by the NAIC at a plenary meeting.

In seeking approval, McCarty expressed “serious concerns” that an immediate adoption of the MLR ratios without accommodating the needs of health insurance agents “will negatively impact the selection process for health insurance in the small group and individual market.”

Regarding the so-called “1099 issue,” a provision of the healthcare reform law designed to raise $18 billion in revenue over 10 years would have mandated that all businesses, tax-exempt organizations, and federal, state and local government entities will be required to issue Form 1099 to vendors from whom they purchase goods totaling $600 or more during a calendar year beginning in 2012.

To meet this requirement, these businesses and entities will have to keep track, by vendor, of all purchases they make that exceed $600. For example, if a self-employed individual makes numerous small purchases from an office supply store during a calendar year that total at least $600, the individual must issue a Form 1099 to the vendor and the IRS showing the exact amount of total purchases.

The Senate is expected to take up amendments to the provision starting the week of Sept. 13.

An amendment to H.R. 5297, the small business lending bill, sponsored by Sen. Mike Johanns, R-Neb., would repeal the provision.

The Johanns amendment replaced the almost $18 billion in revenue that would be lost by repealing the reporting requirement by adjusting the subsidies for individual purchases of health insurance.

Sen. Harry Reid, D-Nev., and Sen. Max Baucus, D-Mont., then introduced a Democrat alternative sponsored by Sen. Bill Nelson, D-Fla that would modify rather than repeal the provision.

The Democratic substitute exempts credit cards from the information reporting requirement, lifts the threshold for 1099 reporting from $600 to $5,000, and exempts firms “employing not more than 25 employees at any time during the taxable year” from the reporting requirements.

It also would authorize the Treasury to exempt “non-troublesome” transactions (like meals, airplane tickets, and hotel rooms) from the reporting requirements.


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