Last week, BenefitMall reported on a hotly debated resolution adopted by the National Association of Insurance Commissioners (NAIC) to adjust the Medical Loss Ratio (MLR) formula to recognize the role of professional health agents and brokers. (To read the blog, click here).
Just prior to Thanksgiving last year, the U.S. Department of Health and Human Services (HHS) published an interim final rule on the computation of the MLR. That rule resulted in the inclusion of brokers’ commissions in the administrative component of the MLR, which only further fueled the trend towards health insurers cutting broker commissions over the past year. Depending on the size of the insured group, health insurance plans can only spend 15-20% of their premiums on the provision of administrative services including broker fees. As a result, the NAIC has been debating a resolution to remedy this situation.
NAIC Resolution
On November 22, in a telephonic meeting, the NAIC commissioners passed a resolution calling for Congress to pass legislation to remove the brokers’ commissions from the administrative component of the MLR. It also called on the HHS Secretary to adopt regulatory relief on the issue.
The motion directly acknowledged the important role that brokers provide:
“Licensed health insurance producers (agents and brokers) provide a wide range of services for both individual consumers and employers of all sizes. Producers interface with insurers, acquire quotes, analyze plan options, and consult with clients throughout the purchase of health insurance. They also provide ongoing service to help their clients utilize and optimize their coverage effectively…”
In addition, the resolution states:
“Congress should expeditiously consider legislation amending the MLR provisions of the PPACA in order to preserve consumer access to agents and brokers, and;
The Department of Health and Human Services should take whatever immediate actions are available to the Department to mitigate the adverse effects the MLR rule is having on the ability of insurance producers to serve the demands and needs of consumers and to more appropriately classify producer compensation in the final PPACA MLR rule. The potential options available to HHS include: (1) approving state MLR adjustment requests; (2) placing an immediate hold on implementation and enforcement of the MLR requirements relative to agent and broker compensation; and (3) considering the NAIC’s finding that a significant portion of insurance producer activities are dedicated to consumer advocacy and service and therefore classifying an appropriate portion of producer compensation as a health care quality expense for purposes of Section 2718 of the PHSA.”
During the NAIC debate, Commissioners Praeger of Kansas and Lindeen of Montana offered an amendment to soften the language to help brokers and remove the list of proposed HHS regulatory actions. That amendment was defeated by a vote of 23-13, with 15 abstentions. Then, a motion to return the resolution to committee failed by a vote of 26-24, with Commissioner Kitzman of Texas abstaining. After a total of over 90 minutes of debate, the resolution passed 26 to 20 with five states, including Commissioner Kitzman of Texas, again abstaining.
Congressional Action
On the federal front, Rep. Mike Rogers (R-MI) and John Barrow (D-GA) introduced H.R. 1206 earlier this year, which now has 139 co-sponsors. To date, the bill entitled, “Access to Professional Health Insurance Advisors Act of 2011,” remains in committee. As discussed in an earlier blog, the bill would allow states to modify the MLR formula that supports the continued use of brokers if there is a threat of market destabilization. Given the deep division in our federal government and the current position of the HHS Secretary, the bill will probably stay in a holding pattern for the near future.
State Waiver Applications
On the state front, many state regulators have been reluctant to back the MLR proposal out of concern for the impact the MLR would have on their state’s individual and small group health insurance markets. To help prevent major disruptions, PPACA proponents included the option for the HHS Secretary to issue temporary waivers. Many states have, or are, applying for MLR waivers in order to prevent undue disruptions in their respective insurance markets.
Federal officials in the Center for Consumer Information and Insurance Oversight (CCIIO) of the Centers for Medicaid and Medicare have been tasked with evaluating the MLR waiver applications. According to the CCIIO, Florida, Georgia, Indiana, Louisiana, and Michigan have submitted the necessary forms for MLR waiver applications, with a final determination to be made soon. However, even though the applications have been submitted, a date for the decision remains undetermined. Florida recently received a notice that their application review would be extended for an additional 30 days. Applications from Kansas, North Carolina, Oklahoma, Texas and Wisconsin are being evaluated for completeness or have been returned with a request for further information. According to the CCIIO, 18 states total have applied for MLR waivers.
We have written extensively about the MLR, and you can go here to read further on the issue. We will continue to follow these developments. BenefitMall will continue to keep you apprised of the latest developments as health care reform continues to evolve. For blog posts, legislative alerts, pools, surveys and other resources, visit www.HealthcareExchange.com or www.benefitmall.com.
