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Senate MLR Bill Aims to Give Agents Some Relief

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U.S. Senator Mary L. Landrieu, D-La., chair of the Senate Committee on Small Business and Entrepreneurship, and Sen. Johnny Isakson, R-Ga., have introduced S. 2068, the Access to Independent Health Insurance Advisors Act, a companion bill and a shot in the arm for a medical loss ratio bill in the House that has many supporters but has gained no traction.

This legislation addresses that provision of the Affordable Care Act (ACA) known as the medical loss ratio (MLR) that many feel has squeezed the livelihood of agents and brokers by excluding their commissions from the healthcare, quality and care portion of the ratio.

The MLR rule, which went into effect on Jan. 1, 2011, mandates that at least 80% (individual and small group) or 85% (large group) of premiums collected by the carrier must be spent on “health care quality improvement.”  

The law, as written by Congress, did not statutorily address how to classify independent agent compensation under the MLR formula. However, through the regulatory process, the Department of Health and Human Services (HHS) ruled that not only was agent compensation included in the MLR formula but it was included as a part of the “non-claims costs” category, the agents community pointed out.

The Landrieu-Isakson legislation specifically excludes agent compensation from the MLR formula in the individual and small group markets. Reps. Mike Rogers, R-Mich., and John Barrow, D-Ga., have introduced similar legislation in the House of Representatives (H.R. 1206, the “Access to Professional Health Insurance Advisors Act of 2011”), which currently has 160 bipartisan co-sponsors but which has not hit the House floor.

Due to the Department of Health and Human Services’ (HHS) interpretation of the MLR provisions in the health reform law, health insurance carriers are required to treat agent and broker commissions as part of their administrative costs.

S. 2068 makes some slight modifications to H.R. 1206 based on the MLR experience over the past year, as the National Association of Health Underwriters (NAHU) pointed out. Representatives Rogers and Barrow support these changes, NAHU said.

They include limiting the MLR exclusion to the individual and small-group health insurance markets, where the problem is most severe; clarifying that any bonuses agents may receive remain a carrier administrative expense; and striking language expanding the state MLR adjustments, as the majority of states that applied have already received their determination from HHS. Under S. 2068, the waiver process will remain as is.

“This threatens the ability of independent agents and brokers to stay in business and serve the public. S. 2068 excludes from the MLR compensation earned by independent agents and brokers that serve the individual and small group markets,” Landrieu and Isakson’s office stated. 

This legislation is supported by NAHU, the Independent Insurance Agents & Brokers of America (IIABA), the National Association of Insurance and Financial Advisors (NAIFA) and the Council of Insurance Agents & Brokers (CIAB). But consumer groups lambasted it. For as many people speak out the MLR to agents, there are others that note that agent commissions have been sliding for a decade, and the MLR just gave an excuse to insurers to pull the plug, which reversing the calculations won’t change.

“Millions of individuals and small businesses depend on licensed agents and brokers to help them navigate the health care marketplace and find health plans that suit their needs and budgets,” Janet Trautwein, CEO of NAHU said. “The Access to Independent Health Insurance Advisors Act of 2012 ensures that health insurance agents and brokers will continue to be able to assist consumers find appropriate health insurance coverage, as well as use that coverage most effectively once it is purchased.”

“We’re grateful for the senators who have introduced the legislation and urge its passage by the Senate,” a CIAB representative stated.

“We are extremely grateful to Senators Landrieu and Isakson for filing this bill as it would provide agents relief from the MLR regulation which has resulted in devastating consequences for our small business members,” Robert Rusbuldt, president of the IIABA said. “We urge both Senate and House leadership to quickly act on the Landrieu-Isakson legislation and the companion Rogers-Barrow legislation that is pending in the House of Representatives.”

“This bill would rob consumers of billions of dollars in rebates and give the money to insurance companies that are already making record profits. … This bill would eviscerate one of the toughest consumer protections in the Affordable Care Act, which has already brought down premiums in some states,” stated Ethan Rome, executive director of Health Care for America Now (HCAN). “They want to hide sales costs in their already skyrocketing premiums in a way that won’t even help the insurance agents who are lobbying for this bill. Instead, the money will wind up in insurance company bank accounts.”

Responses from the NAIC, HHS and NAIC President Kevin McCarty’s office are pending. McCarty has thrown his support behind H.R. 1206 through many actions in the NAIC, including a resolution in November on behalf of the NAIC, and through the NAIC’s Professional Health Insurance Advisors, which McCarty chairs.