The Department of Health and Human Services certified the rules surrounding the calculation medical loss ratios carriers will need to meet beginning in 2011. For the past few months there had been considerable concern expressed by state Insurance Commissioners, the National Association of Health Underwriters and other agent organizations, about the negative impact the MLR provisions of the Patient Protection and Affordable Care Act would have on broker commissions and, consequently, on consumers.
While the Department had engaged in considerable discussion on how to handle this, the medical loss ratio regulations HHS promulgated today does little to resolve the issue. Yes, they leave the door open for addressing the reality that the treatment of commissions under the MLR rules could “disrupt” the market, but they had the chance to do a lot more.
In future posts I’ll address the impact of this result, but for now, so readers know what happened, here is NAHU’s report on the HHS certification of the medical loss ratio rules.
(By the way, brokers reading this who are not members of NAHU should be ashamed. The most important legislation of your career is being reviewed, refined and revised. No organization speaks more loudly or effectively on behalf of brokers than NAHU. You owe it your clients, your profession and to yourself to support those efforts by joining NAHU today).
This morning, the Department of Health and Human Services issued interim final rules on the MLR provisions in PPACA. The rules include agent and broker commissions as part of the non-claims costs in the MLR calculation and does not allow for any portion of the agent and broker commissions to be considered a passed-through expense and excluded from the MLR calculation. NAHU is extremely disappointed in this result because, in our meetings with HHS, the White House and state insurance commissioners on this issue, all repeatedly acknowledged the potentially negative impact of the MLR calculation could have on agents and brokers as well as consumers’ access to affordable health plans.
However, the regulation does permit states to seek waivers from the MLR requirements, including the possibility of seeking a waiver to have agent and broker commissions taken out of the denominator of the MLR calculation for policies sold in that state. The regulation specifically states that the impact of the MLR standard on agents and brokers will be a factor in considering whether a particular individual market would be destabilized. Furthermore, the regulation establishes a process by which stakeholders will have input on the waiver decision-making process and specifically included agents and brokers among the stakeholder groups that must be included.
The interim rule is effective on January 1, 2011, but HHS is actively seeking comments on the regulation and will issue further guidance and a final rule later this year. HHS specifically requested comments on how this interim rule will impact agent and broker compensation and how that may lead to marketplace disruption, and NAHU will be submitting detailed comments on behalf of its members on this critical issue.
Over the next few weeks, NAHU will also be coordinating with the leadership of each state chapter and insurance commissioners in each state to encourage their participation in the medical loss ratio waiver process. We expect that many state insurance commissioners will wish to submit waiver applications based on the impact the MLR rules may have on broker compensation and individual and small-group market competition in their states. The states of Georgia, Iowa, Maine and South Carolina have already indicated to HHS their intent to do so, and Florida and West Virginia have indicated publicly that they are in the process of considering moving forward with a waiver application. NAHU expects that many more states will follow suit once they have finished analyzing the impact the 308-page MLR regulation will have on them.
Finally, NAHU has been working with a bipartisan group of lawmakers for the past few months on federal legislation to exempt agent and broker commissions from the MLR calculation. The regulation delays the time that MLR rebate payments must be made to policyholders until August 2012, providing some time for a legislative solution to be enacted. Pursuing a legislative strategy to permanently solve this problem will be NAHU’s top goal with the 112th Congress.