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NAIC Narrowly Passes Resolution Urging HHS to Exempt Agent Commissions from PPACA Standard

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A deeply divided plenary body of the NAIC passed a contentious resolution backed by health insurers and agents but not consumer groups late Tuesday that urges the U.S. Department of Health and Human Services to take “whatever immediate actions are available”  to release agents and brokers from medical loss ratio (MLR) strictures enacted under the 2010 health care reform act.

In a word, or several, the HHS should put the MLR enforcement requirement on ice, allow state adjustment requests or reclassify compensation to producers, the NAIC said. 

[See also: NAIC to Tell Energy and Commerce Committee It Did Not Receive HHS Influence]

The resolution, which passed 26-20 after a nearly 90-minute conference call — and two prior unsuccessful, yet strong, attempts to either amend it to mitigate its demands or to send it back to committee — also says Congress “should expeditiously consider legislation amending the MLR provisions.” 

Even as the resolution will go to HHS, almost half of state regulators opposed the measure, with the most vocal ones stating the political gambit here by the NAIC would ruin its credibility in Washington.

The stated goal is to preserve consumer access to agents and brokers, who have reportedly seen commissions decrease under the MLR rules, which require 80% of health care dollars to be spent on health care. Agent commissions were not classified as care in the final Patient Protection and Affordable Care Act (PPACA).

Many NAIC regulators said they heard from producers whose commissions were cut by insurers in order to comply with the act. As a result, without a heftier commission structure, the producers said that they couldn’t provide the same level of care to clients as before.

North Carolina Commissioner Wayne Goodwin said during the call that he had heard a lot from agents to that effect in his state and there seemed to be a lot of validity to their concerns.

“Clients need access to guidance and counseling,” Goodwin said. “The current MLR rules would prevent agents from giving counseling.”

Incoming NAIC President Kevin McCarty, Florida’s insurance commissioner, served as the point man for the resolution and shepherded it to final passage despite serious uncertainty over whether or not it would pass. The vote had been delayed from the NAIC Fall meeting, where a bevy of state regulators complained that they had been surprised by the resolution, and that it was based on anecdotal evidence. See our coverage here.

Mike Kreidler, who has been a state and a U.S. Congressman as well as a longtime Washington State insurance commissioner, helped lead the charge against the resolution, saying the resolution will help no one but insurance companies, that it damages the NAIC’s reputation due to the scant process from which it sprang and because of its lack of technical expertise. The points were echoed by California Insurance Commissioner Dave Jones, who said not one consumer had stepped forward to support it and hundreds of interests had urged him to vote against it. Likewise, regulators from Connecticut, New York, Oregon and other states also opposed the resolution.

Commissioners Sandy Praeger of Kansas and Montana Commissioner Monica Lindeen put forward an amendment that would have removed controversial language that some commissioners said was shoddy and not fully presented, as well as removing a list of demands to HHS. That amendment was defeated 23-13, with 15 abstentions.

“I worry about our credibility…we [the NAIC] were written into the [PPACA] law because we were trusted as experts on this. We are going so far here as to put as our credibility in jeopardy. The resolution has to be very careful not to overstate. The findings are incomplete…in the resolution, the resolution is incomplete,” Praeger said.

Kreidler then put forth a motion to refer the resolution back to Executive Committee so there could be public hearings and fuller exposure to the facts so the NAIC would be “dealing with more objective information.”

The vote to refer it back to committee was so close that NAIC President Susan Voss initially got it wrong. The vote to send it to committee failed 26-24, with Texas abstaining. The Washington D.C. insurance commissioner voted to table it, as did John Huff of Missouri. Huff represents the NAIC on the federal  Financial Stability Oversight Council.

The NAIC plenary body then took its final vote, passing the resolution by six votes, with five abstentions, including Montana Commissioner Lindeen, and Texas.

Reaction was swift.

“The Big ‘I’ applauds the NAIC for its recognition of the detrimental impact the MLR calculation has had on independent insurance agency small business owners, consumers, and their agents and brokers,” says Robert Rusbuldt, longtime leader of the Independent Insurance Agents and Brokers of America. “If the MLR formula is not corrected soon, consumers will suffer the prospect of losing the professional, licensed guidance of insurance agents during this time of great change in the health insurance market.”

“This action taken by the NAIC makes great strides in the battle to ensure all Americans have access to health insurance professionals as they navigate the complicated laws and regulations resulting from the Patient Protection and Affordable Care Act (PPACA),” said Janet Trautwein, CEO, of the National Association of Health Underwriters (NAHU). “The commissioners recognize the ‘essential’ role health insurance professionals play in protecting the health and financial well-being of Americans, as well as how the ill-advised Medical Loss Ratio (MLR) measures prevent these licensed professionals from effectively assisting consumers in making educated decisions about their coverage needs.

Robert Miller, president of the National Association of Insurance and Financial Advisors (NAIFA), praised the NAIC in an op-ed for trying to remove a “flaw” in the law.

“State insurance commissioners took a big step this week in an effort to undo some of the damage done by last year’s national health care reform law,” Miller wrote.   

America’s Health Care Plans yesterday said that the current MLR law threatens insurance coverage and access to health advisory information from producers.

Meanwhile, Senate Commerce Committee Chairman Jay Rockefeller took the resolution to task, saying it would cost consumers millions in rebates, which he had tried to write into the initial health care law.

“I am disappointed that a small majority of insurance commissioners have lined up with special interests today rather than consumers,” Rockefeller said. “According to the NAIC’s own analysis, the exemption for agents’ and brokers’ fees will cost American consumers more than $1 billion dollars in rebates they are due to receive in the Spring of 2012. This decision puts corporations ahead of consumers – taking money out of the pockets of consumers and putting it in the hands of greedy insurers.”

Rockefeller must have had a representative on the call late Tuesday as he echoed some NAIC regulators concerns by saying the vote risks damaging the NAIC’s reputation with a move that just placates one interest group and contradicts collected evidence.

HHS’ Centers for Medicare & Medicaid Services (CMS) defended the MLR rule as written, saying it was already saving consumers millions, but that it would review the NAIC’s recommendations and continue to work with them as well as consumer groups and others. See our coverage on the possible legal implications of this here

“The Affordable Care Act works to put consumers first by establishing greater transparency and accountability in health insurance and ensure that Americans receive value for their premium dollar. The medical loss ratio rules does just that,” a CMS spokesperson stated. 

The MLR rule “clearly [accounts] for how much money goes toward actual medical care and activities to improve health care quality versus how much money is spent on administrative expenses like marketing, advertising, underwriting, executive salaries and bonuses,” the spokesperson said.