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Life Health > Health Insurance > Your Practice

Rockefeller Warns NAIC Its Vote on MLR Will Hurt Consumers

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As the NAIC prepares to vote on a resolution requesting that the Department of Health and Human Services (HHS) exempt agents’ and producers’ health commissions from key provisions of the federal health reform act, Sen. John (Jay) Rockefeller IV, chairman of the Senate Committee on Commerce, Science and Transportation, fired off a letter to NAIC President-Elect Kevin McCarty warning the move would deny consumers cost rebates.

Rockefeller told McCarty that the anticipated vote by the NAIC Plenary body this afternoon on a resolution opposing the medical loss ratio (MLR) law as it applies to agents and producers would “weaken” important consumer protections.

“It is already clear that the current minimum medical loss ratio is benefitting American consumers and business by giving health insurance companies a strong incentive to spend their customers’ premium dollars more efficiently and carefully,” Rockefeller wrote in a letter the day before the vote.

The proposed resolution is sponsored by Mississippi, Nebraska, Nevada, New Hampshire, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee, Utah and Wisconsin. It is unclear if the measure will pass, or if so, by a wide margin. It has been delayed, reportedly so it could get more support. UPDATE: Wisconsin asked to be removed from lsit of state sponsors.

According to Consumer Watchdog,  outgoing NAIC President Susan Voss acted under pressure from four commissioners — Dave Jones of California, Mike Kreidler of Washington, Thomas Leonardi of Connecticut, and Teresa Miller of Oregon — to delay the vote.

The commissioners objected apparently because they believe the NAIC was asking HHS to do something that exceeded its authority.

McCarty’s office in Florida, where he is insurance commissioner, did not respond to a request for comment.

The MLR — and PPACA at large, for that matter — is a hot button issue in Florida, where it has been welcomed with open opposition.

Under the MLR law of the landmark patient Protection and Affordable Care Act (PPACA), a provision Rockefeller championed during the debate over the Act, insurers are required to spend at least 80% of their customers’ premium dollars on providing health care and improving quality of life.

The NAIC resolution urges the HHS to mitigate the “adverse effects the MLR rule is having on the ability of insurance producers to serve the demands and needs of consumers,” and to basically classify part of  agent compensation in the 80% portion of the ratio, as health care costs, rather than the 20%.

First, the NAIC proposed resolution contends, companies have reduced commission levels to agents to comply with the MLR, especially in the individual market.  

Second, the NAIC’s work, including hearings, on the issue that a significant portion of insurance producer activities are dedicated to consumer advocacy and service should be categorized as health care and administrative costs.

This results in a situation, the NAIC proposed resolution argues, where the level and quality of expertise, service, and advocacy provided to consumers by agents will deteriorate as services cannot be sustained and will be diminished without adequate compensation. 

HHS could address this effectively, the proposed resolution concludes, by approving state MLR adjustment requests, placing an immediate hold on implementation and enforcement of the MLR requirements relative to independent agent and broker compensation, and by classifying an appropriate portion of producer compensation as a health care quality expense for purposes of Section 2718 of the Public Health Service Act.

Rockefeller took issue with the proposed resolution, noting that it failed to mention that when the NAIC’s  Health Insurance and Managed Care (B) Committee surveyed states with relatively high existing MLRs, consumers still had access to agents without noticeable problems, even though commissions decreased, contradicting the claim that consumers’ access was harmed.

The resolution as proposed calls for Congress and HHS to address negative impacts consumers are claimed to have suffer under the MLR rule, “yet in the many ‘whereas’ clauses that precede this resolution, you offer no evidence that the law is harming consumers,” Rockefeller wrote to McCarty, parroting the language of the proposed resolution.

The industry responded strongly, and has advocated changing the MLR, as well.

“The current MLR regulation threatens to disrupt the coverage that many individual and small group customers have today as well as threaten consumers’ and small employers’ access to the guidance of a trusted and experienced health benefits advisor,” stated America’s Health Insurance Plans (AHIP) press spokesman Robert Zirkelbach.

In Florida, insurers stated, the MLR requirement will cause a reduction in the number of issuers doing business in the individual market, because the MLR requirements disrupt existing business plan of issuers. Insurers said that the result will be issuers exiting the individual market, resulting in less choice for the consumer.


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