The final Medical Loss Ratio Rule is a big disappointment to the agent/ broker community as HHS has decided to NOT exempt agent commissions from the calculation.
Background
Under the PPACA, HHS says consumers will receive more value for their premium dollar because insurance companies are required to spend 80 percent (individual and small group markets) or 85 percent (large group markets) of premium dollars on medical care and health care quality improvement, rather than on administrative costs, starting in 2011. If they don’t, the insurance companies must provide a rebate to their customers starting by August 2012.
HHS also is phasing out special allowances for "mini-med" plans that offer limited benefits to individuals or small groups by slowly tightening standards for those plans. By 2014, mini-meds will have to meet almost the same requirements as comprehensive policies, reports Kaiser Health News.
Agent/ Broker Orgs React
The new regulation, which does not take into account any of the proposed changes put forward by recent NAIC action, was met with criticism by the Independent Insurance Agents & Brokers of America (IIBA), which has argued the MLR requirement has prompted insurers to slash the commissions they pay to agents and brokers. In May, a NAIC task force released a national study of producer compensation that backed up the producer community's position, finding "a significant number of companies have reduced commission levels, particularly in the individual market".
The Big 'I', according to Insurance News Net is extremely disappointed in the final rule issued by HHS on medical loss ratios," said Charles Symington, senior vice president of government affairs at the IIABA. "HHS completely ignored the NAIC's recently passed resolution in which the commissioners urged HHS to provide agents and brokers with relief from the MLR calculation. This relief is essential in order for consumers to have continued access to the professional services of agents and brokers. For this final regulation to have been issued with no changes to the treatment of agent compensation so quickly on the heels of the NAIC's resolution is surprising and will not only harm our thousands of small business owners but most importantly, the consumers they serve."
Even if insurers meet the medical-loss ratio (MLR) threshold, they will still have to explain to consumers how their premium dollars are spent under the final MLR rule released Dec. 2 by the Department of Health & Human Services (HHS).
Final Rule Details
- Notice to Insureds
- Rebates
- ICD-10
- Mini-med policies
- Fraud Detection
The new regulation proposed a new notice requirement that will ensure all consumers receive information on either the amount of their rebate or their insurer’s MLR, regardless of whether there is a rebate, as well as how the insurer’s MLR has improved under the new law.
Estimates from last year indicate that, starting in 2012, up to 9 million Americans could receive rebates worth from $0.6 to $1.4 billion. However, HHS believes the existence of the MLR requirement may have improved the pricing patterns of plans as some reports indicate that premium increases were tempered by the prospect of having to pay rebates.
the final rule allows ICD-10 conversion costs of up to 0.3 percent of an issuer’s earned premium in the relevant State market to be considered quality improvement activities, for each of the 2012 and 2013 MLR reporting years.
The final rule reduces the special circumstances adjustment from a multiplier of 2.0 to 1.75 for 2012, 1.5 for 2013, and 1.25 for 2014 for mini-med policies. In 2014, the use of annual dollar limits on coverage will be banned and we expect that these mini-med policies will cease to exist, as plans offered in the Affordable Insurance Exchanges will offer affordable coverage options to all Americans without annual coverage limits.
The rule, unchanged from the earlier publication, also allows insurers to include payments recovered through fraud reduction efforts in their calculation of incurred claims (up to the amount of fraudulent claims recovered), thereby encouraging plans to fight fraud.
