As predicted by producer organizations, the interim final rule on medical loss ratios issued Monday by the Department of Health and Human Services left agents and brokers on the administrative side of MLR calculations.
According to the rule, “the potential impact of the MLR standard on agents and brokers merits recognition, and in this regulation the impact of the MLR standard on agents and brokers will be a factor in considering whether a particular individual market would be destabilized. HHS seeks comments on the approach taken in this regulation and on the issues related to agents and brokers during years leading up to 2014.”
Although they appreciate being acknowledged, producer organizations are concerned and disappointed that compensation was not directly addressed. “We’re disappointed that they didn’t take the view that agents’ commissions should be treated as a pass-through, but frankly we weren’t expecting them to do so,” says Diane Boyle, vice president, federal government relations, National Association of Insurance and Financial Advisors.
Independent Insurance Agents & Brokers of America predicts that the MLR provision requiring a 15%-20% cap on carriers’ administrative fees will have a “devastating effect on the private marketplace and that consumers will be negatively impacted,” according to Charles Symington, senior vice president for government affairs. “After hearing from various interested parties if HHS does not fix this language before the rule is final, we hope that Congress will step in and revise the MLR formula through the legislative process.”
The MLR provisions will take effect Jan. 1, 2011. Boyle believes congressional action will be necessary to change the status of agents and brokers, but that nothing will happen legislatively before the end of the current lame duck session. “We know that we have some work down the road with the 112th Congress to see if we can’t fix [this] and make sure that consumers have access to fairly compensated professional advice,” she says.
Because HHS said it would factor in consideration for a waiver if the new MLR regulations seem likely to destabilize a state’s individual health insurance market, NAIFA is talking to its state chapters to see which ones are going to pursue it with their state insurance commissioners. A few have already said they would and others are considering the measure, says Boyle.
As for potential legislation, NAIFA and other producer organizations are already in talks with members of Congress to make sure any legislation would be a bipartisan effort that would produce a bill in both chambers. Although Boyle doesn’t know when legislation is likely to be introduced, “We’re in those discussions now. We’re not waiting to see,” she says. “We are moving forward.”
Overall, the HHS regulations made few changes to the National Association of Insurance Commissioners’ Oct. 21 guidelines on the MLR, with the exception of allowing a ratio as low as 40% for limited medical plans and separate reporting for expatriate policies. Click here for more information.
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