The National Association of Insurance Commissioners (NAIC) has backed away from the idea of supporting a congressional bill that could exclude insurance agent compensation from medical loss ratio (MLR) calculations. This decision was made during a NAIC committee conference call concerning a proposal to support the bill, H.R. 1206.
During the call, according to Insurance News Net California Insurance Commissioner Dave Jones and several other commissioners expressed opposition to the H.R. 1206 support proposal. H.R. 1206 would exclude producer compensation from the MLR calculations./p>
Jones asked Kevin McCarty – the Florida insurance commissioner and the head of a task force that approved the H.R. 1206 support proposal – whether the task force vote represents NAIC policy. McCarty, the NAIC president-elect, said it does not.
Background on the Medical Loss Ratio (MLR)
The MLR provision in the Patient Protection and Affordable Care Act of 2010 (PPACA) requires insurers to spend 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts. The U.S. Department of Health and Human Services (HHS) has issued interim regulations that classify producer compensation as an administrative expense for purposes of MLR calculations.
Agents and brokers say insurers are using the PPACA MLR provision to justify cutting individual and small group producer commission rates as much as 50%. The National Association of Insurance and Financial Advisors NAIFA has backed this up with its survey results released earlier this year. Its research found that about 75% of the insurance producers who participated said their health insurance commissions have fallen since Jan. 1. The research also found that another 13% of the 520 survey participants said health insurers have informed them that commissions will be cut in the near year. In addition, About 11% of the survey participants said they have stopped selling and servicing policies for individuals, and 4% said they have gotten out of the health insurance market altogether.
Producers have argued that the customers are the ones who really pay the commissions, and that the insurers simply collect the commissions as a courtesy to the customers. The producers have asked regulators to reflect that view by keeping producer commission payments out of the MLR formula.
So which costs count?
"Loss ratios in the health field are especially complicated," said Kim Holland, secretary of the National Association of Insurance Commissioners. "Companies use so many tools to manage care, and classification is not easy," she added. NAIC can't comment on specific services it's considering.Many states already have minimum medical loss ratios, Holland said, and most take a "fairly conservative view" on what counts as health care -- but the criteria can vary widely.
At issue are medical services such as nurse hotlines, said Dylan Roby, researcher at the UCLA Center for Health Policy Research.
"[Currently] the hotlines are administrative, for people to ask symptom-related questions -- if they should go to the ER or not," Roby said. "If they started including nutrition help, or behavioral health specialists, maybe that becomes health care instead."Though there's nothing to stop insurers from jacking up prices in the short term in order to distort their medical loss ratios, Roby said, HHS will review rate hikes annually. He thinks this will give insurers incentive to keep premiums low.
