WASHINGTON, D.C., June 24, 2015 – The Independent Insurance Agents & Brokers of America (IIABA or the Big “I”) today expressed its support for S. 1661, the “Access to Independent Health Insurance Advisors Act,’’ bipartisan legislation sponsored by Sens. Chris Coons (D-Delaware) and Johnny Isakson (R-Georgia). The bill would clarify that agent compensation is not part of the Medical Loss Ratio (MLR) formula as enacted in the Affordable Care Act (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.” These restrictions mean 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, they must issue rebates to the consumer.
The law did not statutorily address how to classify agent compensation under the MLR formula. Unfortunately, although agent compensation does not go toward insurers’ bottom lines, through the regulatory process, agent compensation was included as a part of the “non-claims costs” category. The Coons-Isakson legislation corrects this issue by specifically excluding agent compensation from the MLR formula.
“The ACA MLR regulations have had a damaging impact on insurance agents, but more importantly also on the consumers who rely on those agents for advice,” says Charles E. Symington, Big “I” senior vice president for external and government affairs. “This legislative fix, as introduced by Sens. Coons and Isakson would clarify that agent compensation is not an insurance company administrative expense and would provide much needed relief to agents and brokers who continue helping consumers navigate the post-ACA health insurance marketplace.”
The impact of the MLR rules on agents and brokers has been damaging as many insurance carriers have significantly cut their agent compensation in an effort to comply with the regulations. In turn, this has 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.
“The Big ’I’ is grateful to Sens. Coons and Isakson for introducing this critical legislation in the Senate,” says Wyatt Stewart, Big “I director of federal government affairs. “Enactment of this bill would help insure that the professional, licensed guidance of insurance agents remains available to consumers.”
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 more than 300,000 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.