Earlier this week, the National Association of Insurance Commissioners (“NAIC”) decided that it needed more time to examine the medical loss ratio (MLR) issue before making a decision on whether it would endorse the Access to Professional Health Insurance Advisors Act of 2011 (H.R. 1206) (the “Act”). The Act, sponsored in Congress by Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.), states that producer compensation will not be considered as part of MLR calculations under the Patient Protection and Affordable Care Act (“PPACA”).
As previously reported here, under PPACA, health insurers must now spend a minimum amount of every dollar received in premiums on healthcare expenses as opposed to administrative expenses or profits distributions (the “MLR Rule”). The MLR Rule requires individual and small group health insurance plan issuers to spend at least 80% of premiums, and large group plans to spend at least 85% of premiums, on medical care or quality improvements.
On November 22, 2010, the U.S. Department of Health and Human Services (HHS) issued final regulations on the MLR Rule. The final regulations categorize producer compensation as an administrative expense within the MLR calculation. According to many industry groups, the categorization of producer compensation as an administrative expense threatens the existence of health insurance producers, as insurers will inevitably reduce their commissions. As commissions decrease, trained health insurance producers will be forced to leave the market. Furthermore, those producers remaining in the market will not be able to invest the time needed to assist consumers in understanding the complexities of the health insurance system.
After the NAIC’s decision to postpone the endorsement of the Act, Thomas Leonardi, the Commissioner of the Connecticut Department of Insurance, stated, “I do appreciate the value of brokers in the system and fully understand their concerns, but to rush this issue to a vote this weekend would be imprudent and would abandon the NAIC's traditionally deliberate and fact-based approach.”