HOUSE COMMITTEE APPROVES MEDICAL LOSS RATIO BILL
On September 20, the House Energy and Commerce Committee approved a bill that would exclude brokers’ commissions from the calculation of a health insurance plan’s medical loss ratio (MLR). The bill, known as the Access to Professional Health Insurance Advisors Act (H.R. 1206), was originally introduced in March 2011.
Under the MLR requirements of the Patient Protection and Affordable Care Act (PPACA), individual and small-group plans must spend at least 80% of the premium dollar on care and quality improvement activities, while large-group plans must meet an 85% standard. The remaining 20% (or 15%) may be used for administrative expenses, salaries and similar payments. Plans that do not meet the applicable threshold for a given year are required to rebate the difference to their insureds.
Brokers’ commissions are now considered administrative expenses under the MLR provision, which has led many insurers to reduce commissions in order to meet the minimum MLR requirements and avoid paying rebates. Brokers’ organizations have argued that the requirements are impeding consumer access to insurance agents and brokers, while the federal government claims that the MLR forces insurers to operate more efficiently, which tends to reduce health insurance premiums. Consumer groups have also criticized H.R. 1206 as detrimental to consumers: a September 19 report by Consumers Union estimated that the bill’s methodology could reduce rebates to insureds from $1.1 billion to less than $400 million. The National Association of Insurance Commissioners, however, supports the brokers’ position.
A similar bill (S. 2288) has been introduced in the Senate, but no action on it is currently scheduled.
For more information on these issues, see Medical Loss Ratio Requirements Force Reduction in Commissions Paid to Insurance Agents and Brokers.
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