Medical Loss Ratio

Restoring Consumer Access to Health Insurance Agent Services


The Issue
The new medical loss ratio (MLR) requirement from the Patient Protection and Affordable Care Act (ACA) mandates that, as of January 1, 2011, health plans are required to spend a minimum of 80% of premiums on medical claims (85% in the large group market) and rebate any excessive overhead to enrollees. As a result, most insurance companies have slashed agent commissions, in many cases by 50%. Eighty percent of NAIFA members surveyed have seen decreased commissions since the MLR went into effect.
 
Health insurance agents and brokers provide consumers with a variety of valuable services – from claims assistance to small business HR functions – but they cannot afford to continue without adequate compensation.
 
Background
Licensed independent insurance producers (agents and brokers) help consumers – both individuals and employers – obtain and get the most out of their health care policies in many ways:
 
  • Agents help their clients navigate the complicated health insurance landscape, including the new employer and individual requirements the ACA imposes.
  • Agents work with clients to evaluate their need for health insurance protection. This may involve substantial research and fact-finding about the client’s needs.
  • Agents educate by explaining the various health plans available and provide appropriate cost indexes.
  • Agents make specific recommendations that suit the client’s objectives and budget. Often a health insurance plan is designed by the agent to fit a client’s particular needs.
  • Agents see to it that accurate and complete information is provided to the insurer to make sure that the client gets the very best premium available.
  • Agents review coverage, suggesting changes and counseling clients on ways to reduce cost – an on-going process since needs continuously change as a person’s family and employment situations change.
  • Agents assist their clients in reviewing the need for legal and tax compliance, recommending other professional assistance when necessary.
  • Agents assist with claims, answer questions and serve as ombudsmen in helping their clients deal with insurance companies. Agents often spend an enormous amount of time helping clients assemble the proper documentation needed to file or follow up on a claim. This is especially true with seniors who receive Medicare benefits.
  • Agents help business owners communicate their benefit packages to employees, and assist employees in understanding how the benefits coordinate with their personal financial plans and government benefits.
 
This service industry has been employing over 450,000 people, but according to the November, 2011 NAIFA survey, nearly a quarter of the agents (22.4 percent) have had to reduce customer service because of the lost compensation. Another 29 percent say they will do so if their commissions remain depressed. One out of five of the brokers surveyed said they have had to lay off employees or reduce the hours of customer-support staff.
 
NAIFA Position
Quick action is needed to preserve the valuable services and programs offered by licensed health insurance agents for the protection of consumers.  NAIFA believes that independent agent and broker commissions should be excluded from the MLR calculation. This fix has several justifications:
 
  • Independent agents further the purpose of keeping health care affordable by helping consumers shop for the most suitable policy at the best price.
  • The current MLR calculation is adversely impacting consumers’ access to professionally-licensed and trained insurance agents and advisors, without an alternative means of ensuring that consumers receive personalized assistance.
  • Like taxes, which are currently excluded from the MLR compensation, commissions are forwarded to agents and brokers and do not represent any part of the insurance company’s bottom line.
  • Insurance premiums have not been lowered as a result of the commission cuts, and insurance companies have told regulators they will not raise premiums if the commissions are excluded from the MLR.
 
The Department of Health and Human Services (HHS) issued its final MLR rule and, despite a resolution in favor of protecting agents by the National Association of Insurance Commissioners, failed to address the problems the MLR is causing agents and their clients.  Representatives Billy Long (R-M) and Kurt Schrader (D-OR) have joined with a growing bipartisan group of 100 cosponsors to offer H.R. 815 to exclude the agents’ compensation from both sides of the MLR equation.