Close Close

Life Health > Health Insurance > Health Insurance

NAIC Delays MLR Action

Your article was successfully shared with the contacts you provided.

WASHINGTON BUREAU — State insurance regulators will be waiting at least 4 more weeks to act on a resolution calling for agent and broker commissions to be excluded from medical loss ratio (MLR) calculations.

The Professional Health Insurance Advisors Task Force, an arm of the Executive Committee at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., decided to postpone action on the resolution Sunday, at a session at the NAIC’s spring meeting in Austin, Texas.

Task force members decided to ask the NAIC staff to provide more data on the MLRPPACA toolkit issue.

Sandy Praeger, the Kansas insurance commissioner and the task force chairman, says postponing action was the right thing to do.

“We need to base our decisions on appropriate data,” Praeger says.

Praeger acted after commissioners from states such as California, Connecticut, Illinois, Oregon and Washington expressed concerns about the resolution.

Florida Insurance Commissioner Kevin McCarty has been one of the most vocal supporters of the resolution.


The Patient Protection and Affordable Care Act (PPACA) created the MLR controversy by requiring health insurers to spend 85% of large group revenue and 80% of individual and small group revenue on medical care and quality improvement efforts.

Health insurance agents and brokers argue that the current medical loss ratio (MLR) formula encourages health carriers to squeeze out producers. They say the carriers have used the MLR provision as an excuse to cut commissions as much as 50% this year.

Producers say the MLR formula should exclude producer commissions, because the customers are the ones who pay the commissions. Carriers collect the commissions only as a convenience to the customers, producers say.

Producer groups are trying to get the NAIC to endorse H.R. 1206, the Access to Professional Health Insurance Advisors Act of 2011 bill. The bill, sponsored by Reps. Mike Rogers, R-Mich., and John Barrow, D-Ga., would exclude producer compensation from MLR calculations.

Sen. John Rockefeller, D-West Va., and Sen. Tom Harkin, D-Iowa, are some of the most prominent opponents of the proposed change.

Rockefeller and Sen. Al Franken, D-Minn., have written letters to the NAIC’s health advisors task force asking it not to approve the resolution.

“Agents and brokers play a role in helping American consumers and businesses purchase health insurance,” Rockefeller wrote in his letter. “But, I won’t support a proposal that allows those same agents, brokers, and health insurance companies to pocket $1 billion in benefits that should instead be going to the benefit of American consumers as part of the health care reform law we approved last year.”


Consumer Watchdog, Santa Monica, Calif., welcomed the task force decision to delay action on the MLR commissions resolution.

“Without the united backing of the state insurance commissioners, the legislation’s special-interest authorship is laid bare and its aim–to protect large percentage commissions on health insurance sales–is easier to detect,” says Judy Dugan, a Consumer Watchdog representative.

Beth Mantz Steindecker, a health care analyst at Washington Analysis, Washington, says the task force decision to postpone consideration of the MLR resolution “is not fatal” to the intensive efforts by agents and brokers to be exempted from the MLR.

Rallying NAIC support is a key factor in building momentum for House action, but getting the bigger obstacle will be getting the change through the Senate, Mantz Steindecker says.

David Eppstein of the National Association of Professional Insurance Agents, Alexandria, Va., says there already is ample evidence that the current MLR formula has hurt agent and broker compensation.

PIA hopes the NAIC “will act quickly to allay any concerns and that the NAIC will just as quickly endorse legislation to remove producer compensation from medical loss ratio calculations,” Eppstein says.

Other MLR coverage from National Underwriter Life & Health: