The National Association of Insurance Commissioners (NAIC) should resist the urge to water down a minimum medical loss ratio model draft, according to the people who represent consumers in NAIC proceedings.

The consumers reps and others have respounded to a request by the Health Insurance and Managed Care Committee at the NAIC, Kansas City, Mo., for comments on a draft of a minimum medical loss ratio (MLR) definitions and calculation methods model regulation that was developed by the NAIC’s Life and Health Actuarial Task Force (LHATF).

The proposed model, which would serve as a template for creating a Regulation for Uniform PPACA ToolkitDefinitions and Standardized Rebate Calculation Methodology for Plan Years 2011, 2012 and 2013, would help states implement minimum MLR provisions in the Patient Protection and Affordable Care Act (PPACA), an Affordable Care Act (ACA) component.

The provisions will require that the minimum amount of health coverage revenue going to medical care and quality improvement efforts be 80% for individual and small group coverage and 85% for large group coverage.

Carriers that fail to spend enough revenue on health care and quality improvement are supposed to send rebates to customers.

Regulators and interest groups have engaged in vigorous debate about the precise definitions to be used in the minimum MLR model.

One term that has been the subject of intense scrutiny has been treatment of sales commissions to be paid to agents and brokers.

Agents and brokers have suggested that states ought to exclude commissions from MLR calculations altogether, because commissions really are paid by the buyers, not by the carriers, and are collected by the carriers only as a convenience to the buyers.

Leslie Carlet of American Benefit Partners Inc., Boca Raton, Fla., has written to defend the value of broker commissions.

“Insurance companies, although not always fans of brokers, have come to rely on brokers to act as the intermediary between themselves and clients,” Carlet says. “Health insurance companies do not have the staff to service clients in the manner necessary to help clients maintain their benefits package. o Currently, there are an overwhelming amount of rules and regulations, both state and federally mandated, regarding benefit plans….. If the broker is no longer available to perform this role, many insurance company issues will then go unchallenged, and claims will go unpaid, or medical services unperformed. … If agent commissions are reduced or eliminated, due to the new MLR regulations, agents will no longer be able to perform at the level necessary for their clients to make educated, informed decisions. Most brokers will reduce their work force, and reduce the salaries of those they are able to keep on staff. Client employees will have no advocate to resolve insurance issues on their behalf.”

The consumer reps have written to the committee to say they like the current version of the model draft and oppose the idea of excluding commissions from MLR calculations.

“It is clear that Congress intended agent/broker commissions to be counted as administrative costs for purposes,” the consumer reps write in their comment letter. “Moreover, the clear wording of ACA precludes the exclusion of commissions.”

The law refers to “‘all other non-claims costs,’ including an explanation of the nature of such costs, and excluding federal and state taxes and licensing or regulatory fees,” the reps say. “If Congress wanted to exclude commissions from ‘all other nonclaims costs’ they could have done so.”

The producers’ argument “is completely without merit,” the consumer reps say. “From the point of view of the consumer, it does not matter what entity ends up with a portion of the premium. The issue to the consumer, and to Congress, is how much of the premium goes toward ‘reimbursement for clinical services provided to enrollees under such coverage [and] for activities that improve health care quality.’ Commissions simply do not fall into either of those categories. It should also be remembered that agents work for insurance companies.”

Producer groups themselves define “commission” as money paid by an insurance company to an agent or broker for procuring and servicing business, the reps say.