The Senate yesterday revived its effort to separate broker commissions from a medical loss ratio formula created by the Affordable Care Act.
Senators Chris Coons (D-Del.) and Johnny Isakson (R-Ga.) on Wednesday introduced the Access to Professional Health Insurance Advisors Act. The bill would clarify that agent compensation is not part of the MLR formula as enacted in the ACA.
In February, Reps. Billy Long (R-Mo.) and Kurt Schrader (D-Ore.) introduced an identical bill to the House of Representatives.
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The ACA established MLR requirements for insurance carriers that went into effect on Jan. 1, 2011. The law mandates that at least 80% (individual and small group) or 85% (large group) of premiums collected by the carrier must be spent on claims payments and health care quality improvement. The restrictions mean no more than 20% or 15% may go toward non-claims costs such as profits, advertising, administrative costs, etc. If a carrier does not meet these ratios, they must issue rebates to the consumer.
The law did not statutorily address how to classify independent agent compensation under the MLR formula. Although agent compensation does not go toward insurers bottom lines, through the regulatory process, agent compensation has been included as a part of the non-claims costs category, which many in the benefits industry feel is inappropriate considering agent compensation does not get allocated toward an insurers bottom line.
The MLR regulations have had a detrimental impact on insurance agents as well as consumers who rely on those agents for advice, says Charles Symington, senior vice president for external and governmental affairs for the Independent Insurance Agents & Brokers of America (IIABA or the Big I). This legislative fix, as introduced by Sens. Coons and Isakson would clarify that agent compensation is not an insurance company administrative expense and would provide much needed relief to agents and brokers who continue helping consumers navigate the post-ACA health insurance marketplace.
