Bill to Exempt Broker Commissions from MLR Formula Introduced Today

A bit sooner than expected: Representatives Mike Rogers and John Barrow introduced legislation today to exempt broker compensation from the medical loss ratio calculations required by the Patient Protection and Affordable Care Act. Under the PPACA, health insurance carriers are obliged to spend 80 percent of the premiums they take in on policies sold to individuals and small group toward medical claims and health quality initiatives. For policies sold to larger groups this medical loss ratio target is 85 percent.

The purpose of the MLR requirement, in the words of Senator Jay Rockefeller, “is to encourage health insurance companies to deliver health care services to their customers in a more efficient and cost-effective way.” As a consequence of this provision, most health insurers have slashed broker commissions on policies sold to directly to individuals (as opposed to through an employer) and a significant number of carriers have made significant cuts to producer compensation for the sale and service of small group policies as well. This has forced many brokers are reconsidering the viability of continuing to service these market segments. Commissioners and others are concerned about

The National Association of Health Underwriters along with allied broker groups, specifically the National Association of Insurance and Financial Advisors and the Independent Insurance Agents and Brokers of America have been seeking to have broker commissions exempted from the MLR formula almost since the law passed. In October they won support from the majority of Insurance Commissioners at a meeting of the National Association of Insurance Commissioners to accomplish this, but at the last minute attorneys convinced the decided they lacked the power to make the change through regulation. Instead they would need to seek legislation to make this change. And they’re working on doing so.

In the meantime, Members of Congress are looking to change the health care reform law to accomplish the same goal – thus the bill introduced today, HR 1206. What’ impressive about the proposal (which will receive a bill number soon) is the bipartisan support it has received. The primary The lead sponsors are Republican Congressman Rogers and Democratic Congressman Barrow. They have been joined by 10 additional Republicans and 3 Democrats. Given the partisan divide prevailing in Congress, this is a remarkable coalition.

Better still, Jessica Waltman, Senior Vice President of Government Affairs at NAHU tells me that a bipartisan companion bill will be introduced in the Senate as early as next month.

Passage of the legislation is far from certain. Some Democratic lawmakers, several consumer groups and the American Medical Association oppose removing broker compensation from the medical loss ratio calculation. And some Republicans may be loath to improve legislation they are hoping to repeal.

Nor would exempting broker compensation result in a return to pre-PPACA commission schedules. While some of the more recently announced draconian cuts would no doubt be walked back. But as I mentioned in yesterday’s post, even if the PPACA were repealed, the way brokers are compensated was likely to change. The benefit of the Rogers/Barrow legislation is that these changes will reflect market forces, not an arbitrary spending target.

I’ll add a link to the press release from Representative Rogers when it’s available online, but here’s some of the key passages:

“’The nation’s 500,000 insurance agents and brokers help consumers find the right health care, advocate on their behalf, identify cost-savings opportunities and inform them of new products and changes in the industry,’ said Rogers, a senior member of the House Energy and Commerce Committee Subcommittee on Health. ‘A mandate in the new health care law severely restricts their ability to perform such services, meaning small businesses are losing jobs or shutting down completely and consumers are finding it harder to access their services.’”

…

“Insurance agents’ and brokers’ commissions are never part of an insurer’s actual revenue, and should never be counted as an insurer administrative expense, as confirmed by the National Association of Insurance Commissioners, the non-partisan experts on state insurance markets.”

…

“’Insurance agents and brokers serve as the voice of health insurance for millions of families and small businesses in rural communities,’ said Congressman Barrow. ‘These folks can help explain to consumers the many changes taking place in the healthcare world over the next few years, and so it’s important that our insurance agents are not hampered by provisions in the new healthcare law. This is another critical improvement that needs to be made to the healthcare law, and I’m hopeful that my colleagues on both sides of the aisle will work with Mike and me to see that this important improvement is implemented.’”

Edited March 18th to add bill number: HR 1206