The future role of agents in selling small group and individual health insurance policies is clearly in doubt now that the National Association of Insurance Commissioners has decided that it is beyond its authority to exempt these commissioners from the medical loss ratio formula imposed under the healthcare reform law.
At the final plenary session at its fall meeting in Orlando Oct. 21, the commissioners decided to table a resolution that would have encouraged the federal Department of Health and Human Services to allow special considerations for agents in any MLR.
The commissioners cited questions concerning the legality of exempting healthcare agents’ commissions from the MLR before tabling the resolution.
Even the method it used to deal with the issue reflected its sensitivity. The commissioners decided to table the resolution, rather than force commissioners to vote on it.
And, it acted in this manner well aware of the fact that more than 20 commissioners are on the bubble, far more than the usual number, because of term limits, voter anger over the current economy and concern about the Obama administration’s priorities.
Moreover, it did so despite intense lobbying by agents. For example, the bipartisan amendment encouraging HHS to have special consideration for agents in any MLR was cosponsored by 15 state insurance commissioners, including two NAIC officers.
In adopting the MLR, the commissioners also decided against including a transition period for its implementation leading up to the onset of health exchanges in 2014, another agent request.
John Greene, vice president of congressional affairs for the National Association of Health Underwriters, said some sort of pass-through for agents is justified.
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 percent.
However, he said, agents’ commissions “can vary very widely,” and that while a “balloon payment” as high as 20 percent may be paid in some cases where new policies are negotiated, most renewals and commissioners are in the six percent range.
He said 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 in order to stay within the range.
The implication of that is that it will 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.
In a presentation to the commissioners the day before the vote, Diane Boyle, vice president, federal government relations for the National Association of Insurance and Financial Advisors, made a strong plea for special consideration for agents.
The truth, she said, is that “agents play a critical role in servicing clients with local, personalized and cost-effective ways that deliver value. And the carriers know that.”
She cited a new survey by NAIFA of more than 800 members, a survey which showed that agents say they receive an average of 223 requests each year from clients who are having difficulty resolving health insurance claims.
In her presentation, she told the commissioners that the survey found that, for each claim, an overwhelming majority of requests require the agent to place at least two calls to the insurance company (70 percent) and two calls to the client (82 percent).
In addition, she said, 43 percent of the agents surveyed said they call the health care provider at least twice per claim. “That’s an average of four to six calls agents have to make per claim issue,” she said.
“Imagine if these year-round consumer queries were left to the state insurance departments,” she told the commissioners, adding, “Pass the aspirin!”
Ms. Boyle concluded by noting that, “In the midst of this massive healthcare overhaul, many are asking how agents will fare in the reformed system.”
The real question, she said, “is how consumers will fare after they are enrolled in a plan? Who will help them navigate this complex system of healthcare?”
In her presentation, Ms. Boyle said that right now, NAIFA members are compensated for the services they provide, and if a client is unhappy with their service, they can go elsewhere.
“Competition drives and enhances the quality of service for consumers,” she said, raising the issue of what role agents will play when the exchanges come into play in 2014, especially when the business structure and compensation levels of agents “are likely to change dramatically before 2014?”