State insurance regulators decided early on during a National Association of Insurance Commissioners (NAIC) meeting to try to protect producers from being hurt by the new medical loss ratio (MLR) rules.
The plenary, the group that includes all voting members of the NAIC, Kansas City, Mo., approved a charge stating that the NAIC’s Executive Committee Task Force on Professional Health Insurance Advisors should work quickly to give the NAIC’s executive committee ideas about ways to keep the MLR rules from hurting consumers, health insurance markets, and health insurance agents and brokers.
The federal MLR rules implement provisions in the Affordable Care Act, the legislative package that includes the Patient Protection and Affordable Care Act (PPACA).
The MLR rules will require that 85% of large group premium revenue and 80% of individual and small group premium revenue go to medical care and quality improvement efforts. Starting in 2012, plans that miss the mark are supposed to send customers rebates.
Producers have argued that tight MLR limits could put pressure on insurers to reduce agent and broker commissions, even though producers provide consumers and employers with much-needed help in understanding the health insurance market, they also have argued that the true payers of commissions are the customers.
Insurers collect commissions and pass them on to producers as a courtesy to customers, and the minimum MLR rules should therefore exclude producer commissions from the ratio calculations, producers have argued.
NAIC members also:
- Approved the American Health Benefit Exchange Model Act. The NAIC developed that model to help implement PPACA provisions that require states to create a system of state-based health insurance exchanges in 2014. The exchanges are supposed to help individuals and small groups buy standardized, federally subsidized health insurance packages that meet exchange program quality standards. Another PPACA-related item approved during the call included was a rate filing disclosure form.
- Approved a retained asset account (RAA) model bulletin that defined an RAA as “any mechanism whereby the settlement of proceeds payable under a life insurance policy, including but not limited to the payment of cash surrender value, is accomplished by the insurer or an entity acting on behalf of the insurer depositing the proceeds into an account, where those proceeds are retained by the insurer, pursuant to a supplementary contract not involving annuity benefits.”
An insurance department using the model would recommend that an insurer using RAAs give life insurance beneficiaries written information about RAAs at the time the RAA option is offered, provide written information about other settlement options that might be available, and also provide a written contract to RAA users that discloses the rights of the beneficiary and the obligations of the insurer.
In the disclosures, an insurer is supposed to say whether an RAA is backed by the Federal Deposit Insurance Corp. of a state guaranty fund. If an RAA is backed by a guaranty fund, “the beneficiary should be advised to contact the National Organization of Life and Health Insurance Guaranty Associations to learn more about the coverage limitations to his or her account,” according to the model text.
- Approved a revision to the Insurance Holding Company System Regulatory Act and Insurance Holding Company System Model Regulation with Reporting Forms and Instructions, in response to concerns that regulators need to do more to coordinate and streamline oversight of regulate, complex insurance company groups.
- Approved a $75 million 2011 NAIC budget.
Allison Bell contributed information to this article.