The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

NAIC to Study MLR Impact on Compensation and Consumers Before Voting on Changes

Posted by Alan on March 29, 2011

Brokers holding their breath to see if their compensation will be removed from the medical loss ratio formula required by the Patient Protection and Affordable Care Act will be turning a darker shade of blue. The hoped for support from the National Association of Insurance Commissioners, which was expected to result from a meeting of the NAIC’s Professional Health Insurance Advisors Task Force this past Sunday, has been delayed at least four weeks.

While there was widespread and strong support for removing independent broker compensation from the formula carriers are used to calculate their medical loss ratio under the PPACA, the Task Force opted to ask their staff to provide additional data before making a decision.

While disappointing the delay is not really surprising. A substantial of the commissioners are new, having just been elected or appointed as a result of the November 2010 election. As Jessica Waltman at the National Association of Health Underwriters put it in a message to NAHU’s leadership, “[I]t was clear as soon as we arrived in Austin that some of the new Commissioners (and there are quite a few of them) had reservations about moving that quickly since this is their first meeting…. some of the more senior Commissioners were very sympathetic to their concerns about rushing things through. The NAIC almost never endorses legislation, so this is a huge deal for them.“

In addition, the issue is controversial. Consumer groups and some liberal Democratic Senators have voiced opposition to changing the MLR formula.

The Agent-Broker Alliance leading the charge for this change to the health care reform law met with several supportive commissioners and the decision was made to delay the vote. This would allow time for information relevant to the issue, already requested of carriers, to be received and considered. This time will also be used by the Agent-Broker Alliance to gather and submit data on how independent brokers are able to save clients money and the post-sale service brokers provide their clients.

Most observers I talk with are optimistic the NAIC will eventually endorse this change in spite of hesitancy from some liberal commissioners. In this regard, Politico Pulse is reporting that “Liberal insurance commissioners got a little feisty (well, for insurance commissioners) … pushing back against the speedy, one-month time line for” considering the broker compensation exemption proposal. Politico quotes California Insurance Commissioner Dave Jones as saying “I’d hate to see haste impede us having the information in front of us to make a relevant decision.” And Washington state’s insurance commissioner Mike Kreidler as declaring “I hope what we produce as a work product we can stand behind and that we’re more interested in accuracy than speed.”

When politicians speak of the need to “study” and “consider” an issue it means 1) they sincerely want to learn more about the topic or 2) they want to defeat the proposal without having to go on the record voting against it. While I hope I’m wrong, given the opposition to the exemption from liberal consumer groups, I’m betting on the latter motivation in this case. (Time will tell as I’m inclined to believe the data will be very supportive of moving forward with the exemption). That the NAIC went ahead with just a four week delay in spite of calls from Commissioners Jones and Kreidler to slow down is a sign that while there will be debate, there’s a better than even chance the NAIC will indeed support legislation to make changes to the medical loss ratio provisions of the PPACA.

Ultimately whether broker compensation is included in medical loss ratio calculations will be determined by Congress and President Barack Obama – which means nothing is certain. While I believe taking this action furthers the intent and purpose of the health care reform bill, the proposal will not enjoy smooth and speedy sailing. The bipartisan legislation introduced by Representatives Mike Rogers and John Barrow, HR 1206, has been referred to the House Energy and Commerce Committee, but no date for a hearing has yet been set.

That the idea is still alive, however, is both remarkable and encouraging. But it’s still too early to start breathing again quite yet.


10 Responses to “NAIC to Study MLR Impact on Compensation and Consumers Before Voting on Changes”

  1. JoeC said

    I haven’t seen any one post anything about this. So, in case you missed it –

    The National Association of Insurance Commissioners today dropped its support for exempting insurance agents’ commissions from the medical loss ratio provision of the healthcare reform law.

    Here’s a link with more info –

    • Alan said

      Joe: The NAIC didn’t drop their support of the agent commission pass through. The full NAIC was never scheduled to vote on the task force recommendation to endorse HR 1206 (the bill that would establish the pass through). The concept is very much alive, both in Congress and in the NAIC. I’ll post on this when I can get my act together to start posting again (sorry for the absence).

  2. JoeC said

    This has now been more than the 4 week delay. Does anyone know the situation on this as of now (May 13)?

    • Alan said

      Hi Joe. As noted in my post today, the task force is expected to announce their recommendation on May 27th.

      • JoeC said

        Has there ever been any information pertaining to what happened on this. Did the committee ever make any kind of recommendation?

  3. Bill Hannant said


    If agent comp is removed from the MLR formula, do you think insurance companies will restore commissions to their pre-PPACA/MLR levels? No, I haven’t been drinking.

  4. Tiffiny said

    I tend to think they are just trying to put the vote off as long as possible. I would prefer to think they are just really studying up on the issue. So is 4 weeks really long enough or just long enough to let it lose a little media coverage? I would like to see what Peter Orszag ( to say about it.

  5. Harald Schot said


    When taking a vote for or against, do they work off a majority or must it be unanimous?

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