Big "I" Praises House Introduction of MLR Clarification Legislation

The Big “I” this week expressed its strong support for bipartisan legislation essential to  preserving consumer access to agents and brokers, the “Access to Professional Health Insurance Advisors Act of 2011,’’ sponsored by Rep. Mike Rogers (R-Mich.) and Rep. John Barrow (D-Ga.), which would clarify that agent compensation is not part of the Medical Loss Ratios (MLRs)  formula as enacted in the health care overhaul law.

The Patient Protection and Affordable Care Act (PPACA) established MLR requirements for insurance carriers, which 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 “health care quality improvement.” In other words, no more than 20% or 15% may go towards “non-claims costs” such as profits, advertising, administrative costs, etc. If a carrier does not meet these ratios, rebates are due to the consumer. 

The law did not statutorily address how to classify independent agent compensation under the MLR formula. However, through the regulatory process not only was agent compensation included in the MLR formula but it was included as a part of the “non-claims costs” category. The Rogers-Barrow legislation corrects this by specifically excluding agent compensation from the MLR formula.

“Agent compensation is passed-through by the insurance carrier from the consumer to the agent and is only collected as part of the premium as a convenience,” says Robert Rusbuldt, Big “I” president and CEO. “This compensation is not insurance company revenue and therefore should not be part of the MLR formula, and the Rogers-Barrow legislation is a crucial technical fix to correct this error.”

Since the MLR rules went into effect they have created tremendous upheaval in the marketplace. The effect on agents and brokers in particular has been damaging as many insurance carriers have significantly cut their agent compensation in an effort to meet these new regulations. This has in turn reduced consumer access to agents and brokers, leading to a detrimental effect on essential services provided such as guidance in claims processing and tailoring health plans to fit the needs of individuals and businesses.

“If the MLR calculation is not quickly corrected to exclude agent compensation, consumers will suffer the prospect of losing the professional, licensed guidance of insurance agents during this time of great change in the health insurance market,” says Charles E. Symington, Big “I” senior vice president for government affairs. “This damaging regulation has already been in effect for almost three months and insurance agents and consumers are today, every day, feeling its negative effects. The legislation is critical to agents and consumers alike and we thank Reps. Rogers and Barrow for introducing it.”

 

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