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.
“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