WASHINGTON BUREAU – Insurance agent groups want the National Association of Insurance Commissioners (NAIC) to tell states to exclude agent and broker commissions from medical loss ratio (MLR) calculations.
The groups say in a comment letter that the NAIC, Kansas City, Mo., should adopt MLR calculation instructions that keep commissions out of the general and administrative expense category, because carriers pass 100% of commission payments on to other parties.
“Exempting pass-through fees from the MLR calculation would preserve existing cost-saving practices in current health insurance markets,” the producer groups say. “At the same time, it would preserve an important operational convenience for small businesses and individuals.”
The producer groups also are asking the NAIC to give carriers more time to adapt to the new rules, by creating a 2011 transition rule that would be based mainly on the current state minimum MLR rules.
The groups that sent the comment letter are the Independent Insurance Agents & Brokers of America, Alexandria, Va.; the National Association of Health Underwriters, Arlington, Va.; and the National Association of Insurance and Financial Advisors, Falls Church, Va.
The minimum MLR requirements are part of the Affordable Care Act, the new federal legislative package that includes the Patient Protection and Affordable Care Act (PPACA). The minimum percentage of revenue going to medical costs and quality improvement efforts is supposed to be 85% for large plans and 80% for individual and small group policies. Insurers and plans that miss the mark are supposed to compensate customers by providing rebates.
Regulators, consumer groups, insurer groups, producer groups and others are engaged in intense negotiations over every factor, definition and calculation method to be used in the minimum MLR and rebate calculations.
Today, the brokers that service large employers tend to have commissions that range from about 2% to 3% of premiums.
Agents in the small group and middle markets earn commissions of up to 20%.
Brokers that serve large employers often get the commission payments straight