Industry organizations agree it was a disappointment when at its fall meeting in late October the National Association of Insurance Commissioners decided to keep agent commissions on the administrative side of the medical loss ratio blanks - particularly when it appeared the organizations had enough votes to ensure passage of a resolution that would have encouraged the Department of Health and Human Services to accommodate producer compensation in MLR regulations.
"We certainly were disappointed," says John Prible, vice president of federal government affairs, Independent Insurance Agents & Brokers of America. "We would have liked to see a vote on the amendment since by all appearances we had enough votes to carry the day."
Instead, the NAIC tabled the resolution Oct. 21 without a vote at the Executive Committee level when questions arose as to whether or not the NAIC had the legal authority to make such a recommendation.
"Our counsel and some of the other counsels disagree with the NAIC staff on that and thought that it was clearly within legal authority to exclude agent commissions from the premium calculation altogether," says Prible.
The NAIC did offer up a measure of broker support by creating an Executive Committee subgroup to work with HHS officials on the issue of producer compensation "immediately," according to Prible.
"We're excited that the ball is still moving forward," says Jessica Waltman, senior vice president of government affairs, National Association of Health Underwriters.
"We're thrilled that they did put together a working group to work with HHS," adds Diane Boyle, vice president, federal government relations, National Association of Insurance and Financial Advisors. "I think that was an excellent development. We're encouraged and excited that they want to continue to work with HHS on how to compensate the agent so that the consumer still has access to the services that we provide."
However, both Prible and Boyle are skeptical about what, if anything, will come out of the subgroup. "I have to caution that we have zero idea of any kind of certainty about how [HHS] will address this issue or if they will," says Prible. "All they've promised is that they will work with the subgroup. They didn't promise to actually do anything."
Looking for a solution
NAHU held meetings about the subgroup with HHS Oct. 28 and NAIC Nov. 9. "We had a great meeting with NAIC staff discussing the importance of preserving the role of the agent in the individual and small group markets and the medical loss ratio requirements, as well as the need for transitional relief for both the individual and small group markets to preserve market stability for both markets, which we believe are intrinsically linked," says Waltman. "We are hoping that they come up with a long-term solution to remove agent and broker commissions from the medical loss ratio equation through the forthcoming DHHS regulation on MLR requirements."
Waltman believes temporary solutions will likely hasten rather than hinder market disruptions. "We're very hopeful that we'll find a way that's legal to work this out so that agents and brokers can be fairly compensated under the new law," she says. "Because everyone agrees that their services are important and that they deserve to be paid for them."
HHS has until the end of the year to make a final decision on MLR regulations, and as of press time a decision was still pending. Boyle doesn't find it likely that HHS will claim regulatory authority to make a decision on producer compensation when the NAIC has already decided it is not authorized to do so.
"I'm somewhat doubtful that HHS or any regulatory body is going to make a decision on that. They're going to simply punt," says Boyle. "So if they punt that authority, what could they come up with in the way of ensuring that agents can continue to be adequately compensated? I can't see any."
Boyle anticipates "a legislative fix" in the future, but admits it's an uphill battle that involves going back to Congress to seek a provision to the Patient Protection and Affordable Care Act that the MLR provides that carriers' earned premium does not include commissions. But between the current lame duck Congress and getting to know the new members, Boyle doesn't anticipate any legislative action any time soon.
Meanwhile, the Big "I" is already hearing from agents and brokers who are getting notices from insurance companies that commission schedules are being changed in anticipation of MLR compliance. Because open enrollment season is in full swing, "we have our backs up against the wall and certainly there's concern that's ongoing and magnifying the closer we get to January 1st," says Prible, "but it's not time to wave the white flag and surrender. We're still trying to get this issue addressed satisfactorily."
"We're urging that they act as quickly as possible and kind of give a hint as to what their direction might be so that the carriers and agents can plan accordingly," adds NAHU's Waltman.
NAIFA's diverse range of members are reacting to an anticipated reduction in commissions differently depending on the market they serve.
Those primarily working in the large group market are already anticipating putting a greater emphasis on compliance services and possibly implementing an additional fee for those services, while current small group and individual brokers whose clients can't afford a fee "may be looking at putting a greater emphasis on other product lines," says Boyle.
To further complicate the matter, the industry organizations are investigating reports that a number of states currently prohibit agents from collecting both a fee and a commission. "Some states allow for that and other states have a special license for consultants to accept fees and you might need to be licensed as a consultant," says Waltman. "So there are definitely avenues that agents and brokers can pursue. It's just going to depend on your state."
The next step is to continue to talk with HHS in hopes that the final recommendation's MLR certification will have "some type of accommodation for agent and broker commissions," says Boyle.
At the same time, the producer organizations are continuing conversations on Capitol Hill to ensure legislators understand the impact on their members and their clients if commissions are subject to PPACA's 15%-20% cap on carriers' administrative fees.
"I think this is just the very beginning of health care reform," says Boyle. "We thought we were busy the last two years, I think we're really just getting started."
Poll shows benefits trump pay hikes
NAIC leaves commissions at risk of cutsBut there's still reason for optimism, says NAHU's Jessica Waltman. Visit eba.benefitnews.com/podcasts to hear her break down what led to the NAIC's decision. In response to a new American Payroll Association survey showing 43% of employees valuing health benefits as more important than higher wages, Dan Maddux, the group's executive director, has suggested that employees consider pretax voluntary payroll deductions and flexible spending accounts to ease the sting of rising health care costs and uncertainty about health care reform.
The "Getting Paid In America" survey of more than 31,000 U.S. adults, which was released during National Payroll Week in September to mark Labor Day, also found that about two-thirds of the respondents live paycheck to paycheck and most misperceive the cost of health care.
With regard to the latter finding, which could artificially inflate the value of health insurance relative to a pay increase, 67% of those polled thought health care costs increased in the 7% to 9% range last year, while research by the Kaiser Family Foundation and Health Research & Education Trust indicated a 5% rise.
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