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Life Health > Health Insurance > Health Insurance

PPACA: Commissions Stay in MLR Blank

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WASHINGTON BUREAU — The National Association of Insurance Commissioners (NAIC) today approved a medical loss ratio (MLR) reporting blank that would keep the cost of agent commissions in the administrative cost total.

Commissioners approved the MLR blank today at a plenary session at the NAIC’s fall meeting in Orlando, Fla. An NAIC plenary session includes all voting members of the NAIC, Kansas City, Mo.

Commissioners developed the MLR blank to help implement minimum MLR provisions in the Affordable Care Act, the legislative package that includes the Patient Protection and Affordable Care Act (PPACA).

The minimum MLR provisions will require the percentage of health coverage revenue spent on medical care and quality improvement efforts to be 85% for large plans and 80% for individual and small group arrangements.

The Affordable Care Act calls for the NAIC to develop the MLR blank and MLR implementation rules. The U.S. Department of Health and Human Services (HHS) is supposed to certify the results. If all goes as planned, HHS will certify the NAIC MLR blank next week. HHS Secretary Kathleen Sebelius says in a statement welcoming approval of the NAIC MLR blank proposal that HHS still must develop an MLR regulation, to help insurers, regulators and other stakeholders apply the MLR rules.

Agents have argued that carriers should exclude agent and producer commissions from MLR calculations altogether, and especially from the administrative expense total, because customers are the ones who really pay the commissions. Carriers simply collect the commissions from customers and pass them directly through to producers as a courtesy to the customers, agents have argued.

Individuals who represent consumers in NAIC proceedings have rejected that line of reasoning and contended that members of Congress clearly have thought of health insurance producer commissions as an administrative expense.

The NAIC’s Health Insurance and Managed Care Committee approved a resolution last week that would have encouraged HHS officials to allow special consideration for agents in any minimum MLR system.

PPACA Toolkit“As important consumer protections and assistance programs are implemented over the next four years… the role of insurance producers (agents and brokers) will be especially important.” drafters say in the resolution. “We encourage HHS to recognize the essential role served by producers and accommodate producer compensation arrangements in any MLR regulation promulgated.”

Commissioners considered the resolution today during the plenary. Commissioners tabled the resolution after questions about the legality of keeping agent commissions out of MLR calculations cropped up.

Although the plenary rejected the agent commission resolution, the plenary did create an Executive Committee subgroup. the new subgroup will work with HHS officials to accommodate producer compensation in MLR calculations. Commissioners formed the subgroup at the request of Ohio Insurance Commissioner Mary Jo Hudson and Florida Insurance Commissioner Kevin McCarty.

Hudson said HHS officials say they will start talking to NAIC officials about the place of agent commissions in MLR calculations “right away.”

The NAIC adopted the subgroup creation amendment after Mississippi Commissioner Mike Chaney

said he fears the NAIC will lose control when HHS goes into the MLR regulatory process. Chaney said he wants assurances from NAIC leaders about the NAIC’s continued involvement in the MLR blank process.

The NAIC will be “looking at a train wreck” if it doesn’t have the ability to influence HHS, Chaney said.

NAIC President Jane Cline, the West Virginia commissioner, noted that the producer commissions issues has been discussed at length over the past several months. Commissioners do not believe they have the authority to address the issue, Cline said.

“We are extremely committed to working with the agent community as we work to find a resolution, and we all recognize the importance of the agent community to advise consumers and help them make informed decisions,” Cline said.

Cline told Chaney that NAIC leaders met with an HHS representative Wednesday to tell HHS once again about commissioners’ strong interest in working with HHS to resolve the agent commissions issue.

Kansas Insurance Commissioner Sandy Praeger said at a press conference that it is not clear what effect the minimum MLR rules would have an agent commissions or what HHS might do about the issue. “It is very much a fluid process,” Praeger said. “No one wants to see a disruption in the marketplace.”

Terry Headley, president of the National Association of Insurance and Financial Advisors (NAIFA), Falls Church, Va., praised commissioners for looking for ways to preserve consumer access to agents and brokers but said NAIFA is disappointed that the NAIC does not believe it has the authority to modify the MLR definition to accommodate agent commissions.

“NAIFA is hopeful that the NAIC and HHS will side with consumers by recognizing that agents need to be compensated for the vital assistance they provide consumers in managing day-to-day health care issues,” Headley says.

Nicole Allen, a senior vice president at the Council of Insurance Agents & Brokers (CIAB), Washington, said the CIAB is disappointed that the amendment to exclude producer commissions from the MLR calculations was tabled.

“We thank the NAIC leadership for its commitment to working with HHS to find an accommodation in the MLR formula for producer compensation,” Allen said. “We look forward to working with the NAIC as they discuss this important issue with HHS, and to preserving our members’ role in the markets.”

Also during the plenary, commissioners rejected proposed MLR blank amendments that would have given carriers more flexibility in applying the MLR rules. One rejected “credibility adjustment” amendment would have given carriers more flexibility in dealing with random fluctuations in claims in small blocks of business, and another would have allowed for aggregating large group experience at the national level.


- America’s Health Insurance Plans (AHIP), Washington, has put out a statement saying adoption of the proposed MLR blank as is would cause serious problems for health carriers.

“The current MLR proposal will reduce competition, disrupt coverage, and threaten patients’ access to health plans’ quality improvement services,” AHIP President Karen Ignagni says. The NAIC intends to phase in the MLR rules from 2010 to 2014. The NAIC needs to do more to make that transition period a smooth one, AHIP says in a written comment it submitted to the NAIC earlier this month. The MLR blank ought to include better a credibility provision, to help carriers with random fluctuations in claims, and the blank also ought to let carriers include more types of expenses in the quality improvement category, AHIP says. AHIP especially would like to see the MLR blank quality improvement expense category include the cost of fraud prevention and detection programs and the cost of shifting to the International Classification of Diseases, Tenth Revision (ICD-10), coding standard. – Health Care for America Now (HCAN), Washington, a group that supports Obama administration Affordable Care Act implementation efforts, says members of the NAIC approved the MLR blank proposal after they faced “intense lobbying pressure from health insurance companies.” About 1,000 insurance officials and lobbyists were in Orlando to try to influence the MLR blank vote, HCAN says in a statement. “The industry has been doing everything it can to dilute, weaken and delay the rule,” HCAN says. Mark E. Ruquet contributed additional information to this report.


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