The decision of state insurance regulators to delay a decision on whether they will support health insurance agents on the critical medical loss ratio issue constitutes to be a major setback for the agents.
The key National Association of Insurance Commissioners’ Professional Health Insurance Advisers Task Force took the action late March 20, as one of the final acts of the NAIC’s spring meeting, held in Austin, Tex.
The panel acted because of pushback from regulators in large states, consumer groups, as well as concerns voiced in no uncertain terms by key members of the Senate, according to industry officials and other key observers.
The agents and brokers, backed by insurance companies, have lobbied fiercely for NAIC support for legislation recently introduced in Congress that would exempt insurance commissions from the medical loss ratio.
The agents and brokers want the NAIC to endorse, H.R. 1206, the “Access to Professional Health Insurance Advisors Act of 2011.” The legislation is sponsored by Rep. Mike Rogers, R-Mich., and Rep. John Barrow, D-Ga.
The legislation would “clarify” that producer compensation would not be considered as part of MLR calculations under a provision of the healthcare reform law enacted last year.
Agents especially, want to use NAIC support to buttress their efforts to get the House to pass the measure.
Sandy Praeger, Kansas insurance commissioner and chairman of the Health Insurance Advisers Task Force, said after the meeting, “This was the right thing to do; we need to base our decisions on appropriate data.”
Beth Mantz Steindecker, a healthcare analyst at Washington Analysis, cautioned that the decision “is not
fatal” to the intensive efforts by agents and brokers to be exempted from the MLR.
The agents, led by the National Association of Health Underwriters, the Independent Agents and Brokers of America, the National Association of Professional Insurance Agents and the National Association of Insurance and Financial Advisors, say that insurance companies have used the authority provided under the MLR provision to cut their commissions as much as 50 percent this year.
They acted despite the pleas of agents, for example, Terry Headley, president of the National Association of Insurance and Financial Advisors, on the unintended consequences of the provisions on agents.
Headley said the provision is having “disastrous effects” on the customer service provided by licensed insurance agents.
He testified that services provided by agents continue long after a policy is in force.
Agents are trained to help their clients with ongoing evaluations of their health care needs and coverage options, and they help clients file claims and provide assistance if problems with care providers or the insurance companies arise, he said.
In addition, many agents design and administer employee wellness plans for their group health clients, and they often serve as a de facto extension of their small business clients’ human resources departments, he said.
Despite his plea and that of others, the panel decided to ask the NAIC staff to provide the panel with substantial data they will use to decide whether to support the request.
Ms. Steindecker acknowledged that NAIC support is a “key factor” in building momentum for House action.
But, a greater hurdle will be the Senate, she said.
“House support will be important, but the Senate is a key obstacle because Senate liberals, led by Sen. John Rockefeller, D-West Va., and Sen. Tom Harkin, D-Iowa, are key opponents of any change to the law.
In fact, Sen. Rockefeller and Sen. Al Franken, D-Minn., wrote letters to the panel asking the NAIC not to pass the resolution.
In his letter, Sen. Rockefeller called the MLR a key
“pro-consumer” provision of the healthcare law, the Patient Protection and Affordable Care Act.
The letter provided a detailed analysis of why exempting agent and broker commissions from the law’s “minimum medical loss ratio” requirements could cost individuals and businesses more than a billion dollars in lost rebates and premiums reductions.
“Agents and brokers play a role in helping American consumers and businesses purchase health insurance,” Sen. Rockefeller said.
“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,” he said.
Ms. Praeger acted after commissioners from such states as California and Illinois, as well as commissioners from Oregon, Washington and Connecticut, voiced opposition.
Support for the provision is being led by Florida Insurance Commissioner Kevin McCarty, who is also seeking to exempt insurers in Florida from all cost-control provisions of the PPACA.
But officials of Consumer Watchdog, a California-based consumer advocacy group, lauded the panel’s decision.
“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,” said Judy Dugan, Consumer Watchdog research director.
“We applaud the consumer-focused state commissioners who made their doubts known. They put the brakes on an industry pay bonus from the pockets of consumers and taxpayers,” she said.