Several healthcare consumer advocacy groups are signatories to a letter (the “Letter”) that was sent to members of Congress in response to a letter that was sent to Congress by the National Association of Insurance Commissioners (the “NAIC”), as discussed in our previous post here. The NAIC letter urged Congress to exempt fees and commissions paid to health insurance producers from the medical loss ratio (“MLR”) calculation under the Patient Protection and Affordable Care Act (“PPACA”) in order to preserve consumer access to agents and brokers.
As it is currently drafted, the MLR requirement under PPACA for large group plans mandates that they spend no less than 85% of their premiums on medical care provided to subscribers and quality improvement activities. The minimum MLR for individual and small group plans is 80%. Insurers whose MLR falls below those thresholds must rebate the difference to their enrollees beginning in the 2012 plan year. Under the current version of the regulations set forth by the Department of Health and Human Services (“DHHS”) that interpret PPACA, the compensation that health insurers pay to insurance producers is not included as medical care provided to subscribers or as quality improvement activities, nor does it exclude that compensation from the MLR calculation. As a result, many health insurers are slashing the commissions they pay to insurance producers as a means to reaching the MLR requirements.
The Letter states that the NAIC’s proposed change could result in the loss of more than $1 billion in rebates to consumers. Further, the authors of the Letter posit “[r]epealing or weakening the MLR provision would result in higher premiums for employers and families today and in 2014 would increase the federal budget deficit by raising the cost of the federal tax credits designed to help families afford insurance purchased through state-based exchanges.”
Currently pending in Congress is H.R. 1206, the Access to Professional Health Insurance Advisors Act of 2011, which would exempt “remuneration paid for licensed independent insurance producers” from the MLR calculation. If passed, this law would override the DHHS current regulations on how the MLR is calculated. H.R. 1206 has many industry supporters such as the National Association of Professional Insurance Agents, the Independent Insurance Agents & Brokers of America, and the National Association of Health Underwriters.