Most U.S. health insurers say they are responding to the new federal medical loss ratio (MLR) rules by cutting brokers’ commissions or planning to cut brokers’ commissions.
Investigators at the U.S. Government Accountability Office (GAO) came to that conclusion after looking into early experience with implementing the MLR requirements at the request of Reps. Robert Andrews, D-N.J., and John Tierney, D-Mass.
The main MLR provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) requires insurers to spend at least 85% of large group premiums and 80% of individual and small group premiums on health care and quality improvement. Insurers that miss their mark are supposed to pay customers rebates.
The provision has already taken effect.
The first full set of data subject to the MLR requirements will be for this year and will not be ready until 2012, but some insurers have helped by preparing preliminary PPACA MLR data for 2010.
“Almost all of the insurers we interviewed were reducing brokers’ commissions and making adjustments to premiums in response to the PPACA MLR requirements,” John Dicken, a GAO director, writes in a letter summarizing the GAO’s findings. “These insurers said that they have decreased or plan to decrease commissions to brokers in an effort to increase their MLRs.”
One insurer said it started cutting brokers’ individual and small group product commissions in the fourth quarter of 2010, and that the cuts in commissions had helped hold down premiums.
“This insurer said these reductions will take effect gradually because they are only being applied to new sales or when groups renew annually,” Dicken says.
Another insurer cut individual product commissions early this years, and that held down the rate of growth in product premiums.
A third insurer told the GAO it will reduce commissions in 2012 and also try to hold down costs by reducing the number of in-network physicians.
In general, most of the insurers had MLRs that exceeded the requirements, Dicken says.
The insurers that participated differed on how the MLR rules would affect efforts to start quality improvement programs and other business activities.