WASHINGTON, D.C., Sept. 11, 2012 – The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) today praised the U.S. House of Representatives Committee on Energy and Commerce Subcommittee on Health for their action on H.R. 1206, the “Access to Professional Health Insurance Advisors Act of 2011.”
The bipartisan H.R. 1206, sponsored by Rep. Mike Rogers (R-Mich.) and Rep. John Barrow (D-Ga.), would clarify that agent compensation is not part of the Medical Loss Ratios (MLRs) formula as enacted in the health care overhaul law. The bill was reported by the Energy and Commerce Committee’s Subcommittee on Health and is now up for consideration before the full Committee.
The Patient Protection and Affordable Care Act (PPACA) established MLR requirements for insurance carriers, which 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 or “health care quality improvement.” In other words, no more than 20% or 15% may go towards “non-claims costs” such as profits, advertising, administrative costs, etc. If a carrier does not meet these ratios, rebates are due to the consumer.
The PPACA did not statutorily address how to classify independent agent compensation under the MLR formula. However, through the regulatory process not only was agent compensation included in the MLR formula but it was included as a part of the “non-claims costs” category. The Rogers-Barrow bill corrects this by specifically excluding agent compensation from the MLR formula, since this compensation is a pass-through payment from the consumer to the agent.
“Agent compensation does not go to an insurance company’s bottom line and therefore should not be part of the MLR formula,” says Charles E. Symington, Big “I” senior vice president for government affairs. “The bipartisan Rogers-Barrow legislation is a crucial fix to correct this error made in the regulatory process.”
Since the MLR rules went into effect they have created problematic disruptions in the marketplace. The effect on agents and brokers in particular has been damaging as many insurance carriers have significantly cut their agent compensation in an effort to meet these new regulations. This has in turn reduced consumer access to agents and brokers, leading to a detrimental effect on essential services provided such as guidance in claims processing and tailoring health plans to fit the needs of individuals and businesses.
“If the MLR calculation is not quickly corrected to exclude agent compensation, consumers will suffer the prospect of losing the professional, licensed guidance of insurance agents during this time of great change in the health insurance market,” says Ryan Young, Big “I” senior director of federal government affairs. “This damaging regulation has already had tremendously negative effects.” Founded in 1896, the Big “I” is the nation’s oldest and largest national association of independent insurance agents and brokers, representing a network of approximately a quarter of a million agents, brokers and their employees nationally. Its members are businesses that offer customers a choice of policies from a variety of insurance companies. Independent agents and brokers offer all lines of insurance—property, casualty, life, health, employee benefit plans and retirement products. Web address: www.independentagent.com.