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Life Health > Health Insurance > Health Insurance

MLRs: NAIC Wants Commissions Passed Through

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WASHINGTON–A key committee of the National Association of Insurance Commissioners (NAIC) late Thursday continued to support allowing health care insurers to pass agents’ commissions through to customers.

The NAIC Health Insurance and Managed Care Committee is supporting the pass-through provision in any regulation it proposes to limit administrative costs–the so-called medical loss ratio (MLR)–that health care insurers could pass on to consumers in healthcare premiums.

Industry officials cautioned that the actions of the committee are only advisory–through a resolution to be sent to the federal Department of Health and Human Services–and that the final decision on agent commissions would be made by the HHS.

The panel also shifted final action on some important issues for insurance agents to the full NAIC, which will meet next week, according to Nicole Allen, senior vice president,, strategic resources, for the Council of Insurance Agents & Brokers.

These include the need for a nationwide transition period for individual and small group business and the question of whether insurers should be permitted to combine their large group MLR data across state lines and operating subsidiaries, Allen said.

“These issues will be very critical to the implementation of the MLRs and to preventing possible market disruptions, and we urge the commissioners to give careful consideration to both of these items,” Allen said.

In a statement this morning to the National Underwriter, Charles Symington, senior vice president of governmental affairs for the Independent Insurance Agents and Brokers of America, said his group is very concerned the MLR provision would have a harmful effect on the private marketplace, especially in the small group and individual markets.

“As a result, the IIABA and our coalition partners have urged the NAIC to adopt a phased-in transition period for the MLR restrictions to take effect,” Symington said. “By instituting a phased-in transition, the IIABA and other groups believe that the NAIC and HHS could ease some of this disruption by allowing the marketplace time to adjust to these new drastic requirements.”

John Greene, vice president of congressional affairs for the National Association of Health Underwriters (NAHU), said some sort of pass-through for agents is justified.

A NAHU survey of its members showed half of what health insurance agents do is unrelated to the sale of the product, he said. That includes handling claims problems for customers as well as explaining to them the limits and benefits of their policies.

He acknowledged that consumer groups pushed for an MLR in the Patient Protection and Affordable Care Act (PPACA) because they believe agents’ commissions run as high as 20%.

However, agents’ commissions “can vary very widely,” he said. While a “balloon payment” as high as 20% may be paid in some cases where new policies are negotiated, most renewals and commissioners are in the 6% range.

The industry concern is that non-Blue Cross-Blue Shield companies serving the small and individual market have high administrative costs and may squeeze agents’ commissions to stay within the range, he said.

The implication is that this could ultimately limit consumer choice and competition in the overall market by reducing the already limited number of non-BCBS underwriters serving a particular state, he said.

The NAIC panel’s support for insurance agents was included in the model regulation containing the definitions and methodologies for MLR. The next step is action by the full NAIC and then final action by HHS.

Effectively, the panel approved the “blank” that healthcare insurance underwriters must abide by effective Jan. 1 under PPACA. The law requires that medical costs comprise either 80% or 85% of premiums charged to subscribers.

The NAIC had sought to secure HHS approval to allow agents’ premiums to be passed through to consumers by including in the MLR blank a resolution that states, “As important consumer protections and assistance programs are implemented over the next four years, and as insurance markets evolve during the transition to exchanges, the role of insurance producers (agents and brokers) will be especially important. We encourage HHS to recognize the essential role served by producers and accommodate producer compensation arrangements in any MLR regulation promulgated.

Diane Boyle, vice president, federal government relations for the National Association of Insurance and Financial Advisors (NAIFA), said HHS is looking at the issues of greatest concern to her organization.

“NAIFA is both encouraged by and appreciative of the NAIC letter sent to HHS Secretary Kathleen Sebelius in advance of the NAIC model,” Boyle said.

The letter shows that the NAIC recognizes that HHS should “recognize the essential role served by producers and accommodate producer compensation arrangements in any MLR regulation promulgated,” she added.


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