The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

HHS Certifies MLR Rules Lack Commission Relief

Posted by Alan on November 22, 2010

The Department of Health and Human Services certified the rules surrounding the calculation medical loss ratios carriers will need to meet beginning in 2011. For the past few months there had been considerable concern expressed by state Insurance Commissioners, the National Association of Health Underwriters and other agent organizations, about the negative impact the MLR provisions of the Patient Protection and Affordable Care Act would have on broker commissions and, consequently, on consumers.

While the Department had engaged in considerable discussion on how to handle this, the medical loss ratio regulations HHS promulgated today does little to resolve the issue. Yes, they leave the door open for addressing the reality that the treatment of commissions under the MLR rules could “disrupt” the market, but they had the chance to do a lot more.

In future posts I’ll address the impact of this result, but for now, so readers know what happened, here is NAHU’s report on the HHS certification of the medical loss ratio rules.

(By the way, brokers reading this who are not members of NAHU should be ashamed. The most important legislation of your career is being reviewed, refined and revised. No organization speaks more loudly or effectively on behalf of brokers than NAHU. You owe it your clients, your profession and to yourself to support those efforts by joining NAHU today).

This morning, the Department of Health and Human Services issued interim final rules on the MLR provisions in PPACA. The rules include agent and broker commissions as part of the non-claims costs in the MLR calculation and does not allow for any portion of the agent and broker commissions to be considered a passed-through expense and excluded from the MLR calculation. NAHU is extremely disappointed in this result because, in our meetings with HHS, the White House and state insurance commissioners on this issue, all repeatedly acknowledged the potentially negative impact of the MLR calculation could have on agents and brokers as well as consumers’ access to affordable health plans.

However, the regulation does permit states to seek waivers from the MLR requirements, including the possibility of seeking a waiver to have agent and broker commissions taken out of the denominator of the MLR calculation for policies sold in that state. The regulation specifically states that the impact of the MLR standard on agents and brokers will be a factor in considering whether a particular individual market would be destabilized. Furthermore, the regulation establishes a process by which stakeholders will have input on the waiver decision-making process and specifically included agents and brokers among the stakeholder groups that must be included.

The interim rule is effective on January 1, 2011, but HHS is actively seeking comments on the regulation and will issue further guidance and a final rule later this year. HHS specifically requested comments on how this interim rule will impact agent and broker compensation and how that may lead to marketplace disruption, and NAHU will be submitting detailed comments on behalf of its members on this critical issue.

Over the next few weeks, NAHU will also be coordinating with the leadership of each state chapter and insurance commissioners in each state to encourage their participation in the medical loss ratio waiver process. We expect that many state insurance commissioners will wish to submit waiver applications based on the impact the MLR rules may have on broker compensation and individual and small-group market competition in their states. The states of Georgia, Iowa, Maine and South Carolina have already indicated to HHS their intent to do so, and Florida and West Virginia have indicated publicly that they are in the process of considering moving forward with a waiver application. NAHU expects that many more states will follow suit once they have finished analyzing the impact the 308-page MLR regulation will have on them.

Finally, NAHU has been working with a bipartisan group of lawmakers for the past few months on federal legislation to exempt agent and broker commissions from the MLR calculation. The regulation delays the time that MLR rebate payments must be made to policyholders until August 2012, providing some time for a legislative solution to be enacted. Pursuing a legislative strategy to permanently solve this problem will be NAHU’s top goal with the 112th Congress.


28 Responses to “HHS Certifies MLR Rules Lack Commission Relief”

  1. Rick said

    Will Texas Exempt itself from the MLR? Just called the Texas DOI and they do not know what the MLR is. Go figure.

    • Bob said

      Remember that TDI are low paid state employees. Don’t expect experts. I mean I just got a letter from them giving a person to contact with questions. That person quit working there 3 weeks ago. Still, they are much better than some other states I deal with.

      Cigna just lowered the boom today nationwide. 40% decrease in first year commissions on individual policies. If the others follow, I think we’ll see a lot of agents go under.

  2. Michael said

    Thanks for posting the news about the MLR rules, but I certainly don’t appreciate the insinuation that anyone who is not a member of NAHU should be ashamed of themselves. I am not a member and I do not lack access at all to the most pertinent information about what is going on with the federal takeover of health care. There are tens of thousands of very engaged and involved health benefits advisors who get very good information from places OTHER than NAHU.

    • Alan said

      Michael: I understand your point, but I wasn’t saying that NAHU is the only source for information. I was referring to its impact — and focus — on representing the interests of brokers and their clients before lawmakers at the federal and state levels. There is political strength in numbers and NAHU needs the support of all professional brokers.

    • Michael, NAHU isn’t just about education. We are a recognizable entity and sometimes Washington listens to us. It’s pretty hard to be listened to as an individual. If you aren’t supporting NAHU, that means I am on your behalf. You owe all of us NAHU members a big fat thank-you for helping you keep your business afloat!

    • Obummer said


      Re-read Alan’s NAHU comment. It said nothing about access to info, but instead focused on the importance of one voice speaking loudly on our behalf. The more members Nahu has, the louder the voice.

      I’m wondering why you aren’t a member? Think about the small amount of the NAHU dues in relation to your health insurance commissions, which are about to get even lower. It’s a worthwhile investment to protect your income and career.

      Alan’s correct–you should be ashamed of yourself. I’m hoping it’s only complete ignorance of the political process that keeps you from joining and not some other character flaw.

      • Alan said

        Thanks for your comments, Obummer, but let’s not go too far. In the U.S. people have the right to associate — or not to associate — as they see fit. That’s not a character flaw, that’s a First Amendment right. Michael is a member of other groups and while I’d hope he’d support NAHU for the reasons you elequently stated, that’s a choice he needs, and has the right, to make.

    • Curt Cella said

      Oh well I might as well jump in here: I certainly see where Michael’s commentary is correct from the perspective of my just waiting for ONE little bit of good news where something in this disaster is breaking our way. Alan you’re great at letting us know what’s going on and then sprinkling a bit of pixie dust on it and blowing sweet nothings in our collective ear and saying “all hope isn’t lost, it’s a long process….keep the faith…”

      Well Alan I DO very much want to keep the faith but I’m not exactly seeing any real clear indication that we aren’t in a whole heap of trouble here. In fact just read an article where even the GOP said they might consider abolishing deduction for group plans as a way to help fix our deficit issues. IF that happens it’s bye bye group health insurance and here’s where you can see where the STATE HEALTH EXCHANGES really start taking on new importance as as an important delivery system to what would become a flood of individual consumers.

      From this seat in the bleachers I keep waiting for NAHU to be something more than they’ve shown of late….even a ‘single’ would seem like a home run at this point.

  3. Leon from Redding CA said

    Commissions and “profit” are dirty words for this administration. Have government bureaucrats also decided they like insurance fraud and abuse? Aren’t insurance costs for preventing fraud and utilization review part of administrative expenses carriers spend as part of thier 20% (or 15%) of MLR? So MLR limits discourage insurers from preventing fraud and utilization reviews to protect patients.

    • Right on Leon. Since when did it become a bad thing to be a business owner and make a profit. Aren’t the business owners the ones putting their neck? Not to mention we are very often small employers too. What about all the other industries that make way way more than insurance companies, like tobacco companies, pharmaceutical companies.

  4. Ann H. said

    Happy Thanksgiving everyone! I’m thankful for you – all of you. We’re in this together, and it’s nice to hear from you!

  5. Today, I was called by Anthem Blue Cross of Califorhnia’s regional sales manager and advised to expect correspondence on Friday — top secret — couldn’t discuss details. I pressed him pretty hard but didn’t get any detail, save to expect it will be with respect to commissions. Keep you posted.

  6. Angie said

    Georgia is submitting exemption, but that didn’t keep BCBSGa from hitting our commissions, including the block already written before the legislation.

    • Alison said

      Angie – did you receive anything about commissions changing from BCBS of Georgia ?

      • Angie said

        Just a face to face visit from our RSM. Apparently they even sent out some senior staff to deliver the news to some of their agents (split up the task I guess, lucky them). Haven’t gotten any amendments in writing as of yet.

      • Alison said

        Im in Ga too Angie – lets keep connected. I got correspondance over the weekend on the individual and was told that it would be changing on small group too but likely mid year. I am expecting a per member fee versus percentage. I just kind of exhale in powerlessness.

        • Angie said

          We sell some small group, but most are 2-9 and are max rated and already at 4.4%. I can’t imagine a per head fee, it would probably cost us more in the long run to service than we make. Unfortunately I haven’t found a better carrier for the 2-9 segment as most carriers don’t seem to want them.

          We sold a lot of BCBS over the years (individual) and because of their hitting of our existing block, we are taking a substantial hit to our income starting Jan 1. Most likely we will have to lay someone off. It breaks my heart as no one in my office deserves that.

  7. My favorite and most annoying paragraph is where you point out that all the agencies acknowledge the affect that the MLR reguations will have on the insurance broker. Which means, they know they are destroying our relationships with our customers and THEY DONT CARE. I can hardly wait for the US Dept. of HHS to start hiring ‘knowledgeable’ service representatives to answer the phones from such talented labor pools of Silver Spring and downtown Washington D.C.

    • Rick said

      Those talented labor pools of Silver Spring & downtown Washington will be inefficient unionized bureaucrats taking home much more money and benefits than insurance agents ever have. More importantly they also will be reliable democrat voters.

  8. This is all so disappointing. Last week I received a notice from Humana that said if I didn’t have enough business even on their ancillary lines they will start chopping commission. Those plans aren’t even affected by the MLR. Companies like Humana are clear that they don’t give a hoot about us agents out there (unless you are a bigger agency) and I wonder if the other carriers supported us when it comes to this or are they looking for an opportunity to cut our income too? Maybe I shouldn’t have renewed by business license after all for 2011.

    • Alan said

      Lois: Disappointing, yes, but the end of it all … far from it. First, it’s important to look at which carriers are doing what. You’re in California and the carriers that are committed to the market will put forward reasonable commission schedules (hopefully the first time; but no later than the second attempt). Those who aren’t will reduce commissions to assure they don’t make sales, without actually withdrawing from the market. This gives them time to see how the things shake out. And that’s the second reason not to give up. The MLR provision, along with other components of the PPACA, are not set in stone. A lot of effort will be put forward to make find a better balance. This is still relatively early in the process — there’s a long way to go.

  9. Jay G. said

    Any thoughts on whether Texas will submit a waiver?

    • Alan said

      So far only four states have indicated they will file for examptions: Maine, Iowa, South Carolina and Georigia. However, it’s inevitable others will, but I don’t know what any specific state other than these four intend to do. Sorry ’bout that.

      • Obummer said


        Is there any reason a state wouldn’t want to request a waiver? Is there any downside to doing so?

        • Alan said

          The waivers require states to attest that applying the MLR rules at this time will “disrupt” their individual (or small group or large group) insurance markets. Which means that in states in which the MLR is having little or no impact, getting a waiver will be difficult. But even if the effect of the medical loss ratio provisions are more than “a little,” a state is not obliged to apply for a waiver. State leaders may determine the disruption is manageable — or even positive.

          My guess is that where there’s little competition today (Alabama’s small group market is dominated by a single carrier, for example) or where state leaders have a political agenda or incentive to be tough on carriers that you won’t see waivers being applied for. In states that want to ease into the MLR rules (which should be most jurisdictions) they’ll be seeking the waivers. Hope this helps.

  10. Alan,

    California is such a blue state, will California submit a waiver? I am afraid they will just accept eliminating agents.

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