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Life Health > Health Insurance > Health Insurance

PPACA: NAIC Ices Agent Comp MLR Exclusion Effort

By Arthur D. Postal

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WASHINGTON BUREAU — The National Association of Insurance Commissioners (NAIC) has backed away from the idea of supporting a congressional bill that could exclude insurance agent compensation from medical loss ratio (MLR) calculations.

The NAIC, Kansas City, Mo., considered a proposal to support the bill, H.R. 1206, todayUSA during a plenary conference call.

The plenary is an assembly that includes all voting members of the NAIC.

California Insurance Commissioner Dave Jones and several other commissioners expressed opposition to the H.R. 1206 support proposal.

Jones asked Kevin McCarty – the Florida insurance commissioner and the head of a task force that approved the H.R. 1206 support proposal – whether the task force vote represents NAIC policy. McCarty, the NAIC president-elect, said it does not.

McCarty and other H.R. 1206 supporters ended up not pursuing a plenary vote.

The MLR Provision

A provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) requires insurers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts. The U.S. Department of Health and Human Services (HHS) has issued interim regulations that classify producer compensation as an administrative expense for purposes of MLR calculations.

Agents and brokers say insurers are using the PPACA MLR provision to justify cutting individual and small group producer commission rates as much as 50%.

Producers have argued that the customers are the ones who really pay the commissions, and that the insurers simply collect the commissions as a courtesy to the customers. The producers have asked regulators to reflect that view by keeping producer commission payments out of the MLR formula.

H.R. 1206 would exclude producer compensation from the MLR calculations.

Rep. Mike Rogers, R-Mich., the lead sponsor of H.R. 1206, said recently at a House hearing that health insurance producers will continue to be in a desperate situation unless Congress acts to change the MLR formula in the HHS regulations.

McCarty’s task force — the Professional Health Insurance Advisors Task Force – agreed to endorse H.R. 1206 June 30.

Since then, the people appointed to represent consumer interests in NAIC proceedings have sent the NAIC a letter expressing disappointment about the task force decision to support H.R. 1206.

Other MLR coverage from National Underwriter Life & Health:

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