Insurance Industry Expects Senate Bill to Exempt Brokers’ Fees from MLR

Jan. 25, 2012 – 5:33 p.m.

Insurance Industry Expects Senate Bill to Exempt Brokers’ Fees from MLR

By John Reichard, CQ HealthBeat Editor

Health insurance industry sources said Wednesday they expect Sen. Mary L. Landrieu of Louisiana to be the prime author of the Senate version of legislation that would exempt insurance agent and broker commissions from “medical loss ratio” calculations under the health care law.

One official with the National Association of Health Underwriters (NAHU), which held its annual meeting in Washington, D.C., this week, said Landrieu would be joining with fellow Democratic Sen. Ben Nelson of Nebraska and Republican Sen. Johnny Isakson of Georgia in sponsoring the bill. And a fourth, as-yet unnamed Republican is expected to be among the four original authors of the legislation, the source said.

Similar legislation (HR 1206) in the House, introduced by Michigan Republican Mike Rogers, has attracted 149 cosponsors according to a CQ tally. But the industry official said the number is now around 170, perhaps reflecting recent Capitol Hill visits by brokers and agents.

The National Association of Insurance Commissioners voted by a narrow margin late last year to encourage Congress to consider legislation exempting brokers from the MLR calculations. The NAIC did not specifically endorse the Rogers bill, which appeared unlikely to get through the House. But the measure’s supporters hoped the NAIC resolution would give the measure a lift.

The insurance industry official stopped short of predicting when either bill might get through its respective chamber but said support is growing.

A spokeswoman for Landrieu was noncommittal about whether the senator would introduce a bill.

“As chair of the Senate Small Business Committee, Senator Landrieu is concerned that HHS’s interpretation of the health care law threatens the ability of insurance agents and brokers – many of whom are one- or two-person small businesses – to continue providing essential services to consumers who depend on them to assist with coverage or claims problems,” said Amber McDowell, a spokeswoman for Landrieu. “Senator Landrieu is exploring targeted solutions to this issue, and we will have more details on her plan in the near future.”

NAHU on Wednesday wound up its three-day conference in Washington, which was attended by some 700 agents, consultants, and brokers.

The medical loss ratios are a measure of what percentage of the premium dollar an insurer pays out for medical care and quality of care improvement and what percentage goes for profits and other “administrative expenses.” The health care law counts broker commissions as administrative expenses, which makes it harder for insurers to comply with the law’s MLR requirements that at least 80 percent of the premium dollars in the small-group and individual insurance market go toward medical care and quality improvement and no more than 20 percent toward administrative costs. The corresponding percentages for the large-group market are 85 percent and 15 percent.

Brokers and agents say insurers are cutting their commissions because of the MLR requirements. The Rogers bill would take the commissions out of MLR calculations. That would mean that insurers would not have an incentive to lower broker commissions in an effort to meet requirements.

The NAHU official said the Senate bill includes several modifications to the House bill designed to widen support in the Senate, particularly among Democrats. In the House, 18 Democrats back the Rogers bill, according to the CQ tally. A total of 218 House votes are needed for passage.

For example, under the Senate bill the commissions would be taken out of MLR calculations only for the individual and small-group markets, not for the large-group market. Also, bonuses paid by insurers to agents who throw a lot of business their way would continue to count as administrative expenses and would not be taken out of the MLR arithmetic.

The Senate bill also drops language from the House measure that would have allowed states a longer period to comply with MLR requirements in the small-group market through waivers obtained from the Centers for Medicare and Medicaid Services. Under the health care law, that waiver process only exists for the individual insurance market.

Source: CQ Online News

Same-day coverage of the people and events shaping health care policy from Washington.

© 2012 CQ Roll Call All Rights Reserved.


One Response to Insurance Industry Expects Senate Bill to Exempt Brokers’ Fees from MLR

  1. Leland Oldaker says:

    Great information 🙂

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