The House of Representatives has revived an effort to separate broker commissions from a medical loss ratio formula created by the Affordable Care Act, by introducing legislation many in the industry feel would correct an oversight in the law that has led to decreased agent compensation.
Reps. Billy Long (R-Missouri) and Kurt Schrader (D-Oregon) on Monday introduced the Access to Professional Health Insurance Advisors Act of 2015. The bill would clarify that agent compensation is not part of the MLR formula as enacted in the ACA.
The ACA established MLR requirements for insurance carriers that went into effect on Jan. 1, 2011. The law mandates that at least 80% (individual and small group) or 85% (large group) of premiums collected by the carrier must be spent on claims payments and health care quality improvement. The restrictions mean no more than 20% or 15% may go toward non-claims costs such as profits, advertising, administrative costs, etc. If a carrier does not meet these ratios, they must issue rebates to the consumer.
The law did not statutorily address how to classify independent agent compensation under the MLR formula. Although agent compensation does not go toward insurers bottom lines, through the regulatory process, agent compensation has been included as a part of the non-claims costs category, which many in the benefits industry feel is inappropriate considering agent compensation does not get allocated toward an insurers bottom line.
The MLR regulations have had a detrimental impact on insurance agents as well as consumers who rely on those agents for advice, says Charles Symington, senior vice president for external and governmental affairs for the Independent Insurance Agents & Brokers of America (IIABA or the Big I). The legislative fix, as introduced by Reps. Long and Schrader, would clarify that agent compensation is not an insurance company administrative expense, thereby providing much needed relief to agents and brokers across the country who continue to help consumers navigate the post-ACA health insurance marketplace.
Commission cuts
According to the trade group, many insurance carriers have significantly cut their agent compensation in an effort to comply with the MLR regulation.
The National Association of Insurance and Financial Advisors agrees, saying most insurance companies have slashed agent commissions, in many cases by 50%. Eighty percent of NAIFA members surveyed have seen decreased commissions since the MLR went into effect, the group says.
Including insurance brokers compensation in the MLR is a bad idea, so we welcome progress toward getting their commissions removed from the calculation, says NAIFA President Juli McNeely. Since the MLR went into effect, our members who provide health coverage have seen their compensation decrease dramatically. This doesnt just hurt the brokers, but also their employees and, most importantly, the consumers who rely on them to obtain coverage and assistance in understanding the complex health care law.
Brokers provide myriad services, from analyzing clients coverage needs to helping individuals get claims approved to providing wellness programs for small businesses, she adds.
They are the de facto human resources departments for many small companies. These are services that no one else provides and that brokers cannot continue to provide if they are not fairly compensated, she says.
