Reprinted from AIS's HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.
The House Energy and Commerce Committee on Sept. 20 approved the long-pending bill that would remove broker and agent fees and commissions from administrative costs for purposes of calculating a health insurer’s medical loss ratio (MLR). But since the House adjourned the next day and the Senate a few days later until after the November elections, the controversial bill probably will have to be attached to other legislation in a post-election “lame duck” session in order for it to be enacted this year.
The committee’s 24-14 vote suggests the measure, HR 1206, which has bipartisan sponsorship, may have a tough road since only one Democrat voted for it. However, Jessica Waltman, senior vice president of the National Association of Health Underwriters (NAHU), an organization that is one of the bill’s major backers, tells HRW that committee attendance wasn’t great on the voting day so close to an adjournment preceding election campaigning, and she predicts the measure will get greater bipartisan support when it reaches the chamber’s floor. NAHU, she says, is “thrilled” with the committee approval and points out that its principal sponsor, Rep. Mike Rogers (R-Mich.), said after the vote that he expects the bill to reach the House floor in the lame-duck session.
The measure is sure to face continued opposition from consumer groups there. They will be armed with the findings of a Consumers Union study released in September that the $1.1 billion in MLR rebates for 2011 that are being sent to individuals and businesses under terms of the health reform law would have been “reduced to as little as $378.8 million” had HR 1206 been in effect. NAHU, though, questions this figure and notes that rebates are likely to be far lower in the future since they will be based on multiple years of claims and since insurers now have had time to adjust the way they do business.
The Rogers bill is designed to deal with a situation caused by a provision in the reform law that requires health insurers to have at least an 80% MLR in the individual and small-group markets and 85% in the large-group market. The implementing regulations state that administrative costs cannot be claimed in the numerator of the fraction that determines MLR levels, and that sales commissions are considered administrative costs.
Both sides seem to agree that legislation offers the best chance for agents and brokers to reverse the often-substantial drops in their compensation that have followed adoption of the MLR regulations in 2010 (HRW 12/6/10, p. 1). The National Association of Insurance Commissioners at several points looked into whether it had authority to grant brokers relief from the effects of the MLR rules and concluded that it did not. The group, in an acrimonious conference call in November 2011, did narrowly approve a resolution calling on HHS and Congress to give such relief (HRW 12/5/11, p. 1).
That call and resolution was an “embarrassment” to NAIC, asserts Tim Jost, a Washington and Lee University law professor who is a consumer representative to NAIC. It proved “very divisive” to a group that “likes to operate by consensus” and, he tells HRW, “I would be very surprised if the NAIC wants to open this can of worms” again. While Jost acknowledges that another provision of the Rogers bill would require CMS to defer to state insurance commissioners on whether to grant state waivers from the MLR requirements in both the individual and small-group markets, he contends this was put in just to curry favor with NAIC and did not alter the group’s division on the issue. “That provision is an additional problem,” he says, noting that, among other things, MLR waivers now can be granted to states only in the individual market.
If HR 1206 comes up in a lame-duck session, says Jost, Republicans will be faced with a tough decision given their oft-stated position of wanting to repeal the entire health reform law rather than revising pieces of it. He contends that if Republicans do wind up pushing the measure on the floor, “I don’t think it would have any [significant] Democratic support.”
Jost is quick to add that “I have no problem with brokers and agents being properly compensated.” What does concern him, he explains, is that “this is just the wrong approach” since nothing in the bill would require insurers to restore prior commission levels. Carriers have boosted their profits by cutting commissions, he says, and “I doubt they would” go back to prior levels even if a new law enabled them to do so.
If Congress wants to do something to help agents and brokers, he says, it could set minimum commission levels but then raise the minimum allowable MLR to offset this. HR 1206, on the other hand, allows insurers to keep current commission levels if they wish without raising the minimum MLRs, Jost notes.
Waltman, of course, sees the situation far differently. There is no reason, she says, for insurers not to restore the commissions they cut in the aftermath of the MLR requirements. Such restoration would not hurt them on MLRs, insurers know they need agents and brokers to improve access to their products, and carriers must do a lot more when agents aren’t involved in the marketing process, she maintains. Asked if broker groups have specifically asked insurers about their intent on commissions if HR 1206 is enacted, Waltman replies that antitrust laws prevent brokers from having such discussions.
She also rejects the consumer advocates’ views about the impact on rebates. The MLR rebates for 2011, according to Waltman, are going to less than 10% of privately insured Americans, and even CMS said the average rebate is only $151, an amount that pales next to the value agents and brokers supply for health insurance purchasers. Furthermore, the majority of the rebates went to employers, which can keep most or all of them, depending on what percentage the employers contribute to their workers’ coverage, she points out.
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HRW sponsored a recent webinar on MLRs. Click here for an On-Demand Recording of Medical Loss Ratio Rebates: How Health Plans Are Handling 2012 Rebates and Preparing for Future Years.