Data collected by the National Association of Insurance Commissioners suggest that average consumer rebates would have been more than 60% lower if agent and broker commissions were excluded from medical loss ratio calculations in 2010.
According to a draft by the NAIC actuarial working group that analyzed data provided by the National Association of Health Underwriters, three carriers, several states and software company Connecture Inc., the individual market would be most affected by commission exclusions in that the percent of members receiving rebates would drop by more than 21%, from 52.9% to 31.3%. Small group market members would see a reduction of 15.2%, and large group member rebates would drop by 9.3%.
However, NAHU’s Jessica Waltman is quick to point out that the actual dollar amount individual consumers would save if commissions remained an administrative cost in MLR calculations is negligible compared to the overall savings they currently receive by working with an agent or broker. For example, a chart produced by the NAIC working group shows the per member per month 2010 rebate amounts would have averaged $8.09, $2.13 and $1.13 in the individual, small group and large group markets, respectively.
“Everyone wants to reduce the cost of health care, but all of these changes are being done so that a very, very small percent of people would get a few dollars a month, maximum — most people would get far less and the consequence of this would be the loss of agent services, the decimation of an industry, the loss of all these jobs,” she says.
“Consumers would lose all these services and the cost to provide these services won’t go away. Consumers will still have service issues and problems. So the state insurance departments or the carriers would have to absorb them anyway. The money would just be redirected somewhere else.”
Additionally, Waltman points out that the 2010 data used by the working group does not reflect post-Patient Protection and Affordable Care Act adjustments made by carriers to reduce administrative costs to comply with the 20% administrative cost cap for large groups and 15% cap for small groups and individuals.
“You’re going back and applying the MLR requirements to a plan year when the health plan didn’t even know that there were the MLR requirements. They made absolutely no adjustments,” she says.
“So it’s not really a fair prediction of what rebates might be this year because the carrier didn’t do anything to cut their administrative costs. This is like if you applied the new rules to the old world without letting the carriers make any changes to their business model.”
The NAIC’s draft executive summary addresses Waltman’s point: “Carriers will likely make changes in their operations as they implement and react to the various provisions of the Affordable Care Act. Changes in commissions are just one example of this.”
Other results of the actuarial report include several observations related to commission levels:
- The numerical data do not provide a clear trend in commission reductions prior to 2011
- Some states with higher MLR requirements already in place do report reductions in commissions over several years
- While a significant number of companies have reduced commission levels for 2011, particularly in the individual market, a significant number of companies have yet to reduce commissions in 2011
- States with higher MLR requirements have not observed any problems with consumer access to insurance or to producers.
The next step is for the NAIC’s Health Insurance and Managed Care (B) Committee to review the data at its June 7 meeting, then send its findings to the Executive Committee Task Force on Professional Health Insurance Advisors, Waltman reports. It is then up to the Executive Committee to decide if it will bring the issue to the entire NAIC to vote on whether or not to endorse legislation introduced in the House of Representatives from Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) to remove commissions from MLR calculations.
From there, Waltman predicts three possible outcomes from the NAIC:
1) Endorsement of the bill
2) A decision that the bill has no impact and won’t be endorsed
3) A decision that there was an impact, but the Rogers-Barrow bill is not the right solution, and therefore the NAIC would provide a recommendation to Congress and HHS that they do something else to address the issue.
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