A House subcommittee late Tuesday passed legislation that would exempt commissions paid to insurance agents to find health policies in the individual and small group markets from the medical loss ratio calculation mandated under the healthcare reform law.
The bill is H.R. 1206. It is sponsored by Rep. Mike Rogers, R-Mich., and Rep. John Barrow, D-Ga. It was introduced last March.
The bill was reported out by voice vote in the Health Subcommittee of the House Energy & Commerce Committee (E&C Committee).
An E&C Committee spokesperson said a full committee markup has not yet been scheduled, but the issue will likely be dealt with before Congress leaves for its October recess.
The bill has 213 House sponsors, including 25 Democrats.
Despite the strong support, “enactment prospects remain well below 50%,” according to an investor’s note by Beth Mantz-Steindecker of Washington Analysis.
“Even though the bill will likely easily clear the House, Senate Democrats and the Obama Administration oppose changing the policies,” Mantz-Steindecker said.
“The health insurance industry and the broker community have long sought to re-jigger the MLR formula to allow broker fees to count and thus make it easier for health insurers to reach the federal thresholds,” she added.
Similar legislation is pending in the Senate.
The Senate bill, S. 2068, the Access to Independent Health Insurance Advisors Act, was introduced in February by Sen. Mary L. Landrieu, D-La., chair of the Senate Committee on Small Business and Entrepreneurship, and Sen. Johnny Isakson, R-Ga. Sens. Lisa Murkowski, R-Alaska, and Ben Nelson, D-Neb., are also cosponsors of that legislation.
The House and Senate bills are somewhat different, but generally seek to “clarify” that producer compensation would not be considered as part of MLR ratio.
This provision limits administrative costs in health insurance premiums to 15 percent for large groups and 20 percent for small groups. As a result, agents say their commissions have been cut by up to half on health insurance products.
The House panel acted in reaction to a hearing in September of last year where “witnesses testified that the MLR rule has created a ‘desperate economic situation’ for a half-million insurance agents and brokers,” according to information provided members of the committee at the markup.
“This requirement could force agents to leave the market or significantly limit their plan offerings, creating a level of disruption that would quickly destabilize the market and threaten the ability of insurers to continue offering plans,” the document said.