At press time, U.S. Sens. Johnny Isakson (R-Georgia) and Chris Coons (D-Delaware) were expected to introduce bipartisan legislation later today which would clarify that agent compensation is not part of the Medical Loss Ratio (MLR) formula as enacted in the Affordable Care Act (ACA). The legislation, which the Big “I” strongly supports, mirrors a similar bill in the U.S. House of Representatives, introduced by Reps. Billy Long (R-Missouri) and Kurt Schrader (D-Oregon).
The ACA established MLR requirements that took effect Jan. 1, 2011, mandating that carriers spend at least 80% (individual and small group) or 85% (large group) of collected premiums on claims payments and “health care quality improvement.” These restrictions mean no more than 20% or 15% may benefit “non-claims costs” such as profits, advertising and administrative costs. If a carrier does not meet these ratios, it must issue rebates to impacted consumers.
The law did not statutorily address how to classify independent agent compensation under the MLR formula. Although agent compensation does not benefit insurers’ bottom lines, the regulatory process included agent compensation in the “non-claims costs” category. The Isakson-Coons bill corrects this issue by specifically excluding agent compensation from the MLR formula.
The MLR rules have had a damaging impact on agents and brokers, because many carriers have significantly cut or eliminated agent compensation in an effort to comply with the regulations. This has also reduced consumer access to agents and brokers, decreasing essential services such as guidance in claims processing and tailoring health plans to fit the needs of individuals and businesses.
In addition to working with Congress, the Big “I” has been advocating before the Center for Medicare & Medicaid Services, including submitting multiple comment letters on the issue and will continue to pursue both legislative and regulatory changes to this damaging rule.
Wyatt Stewart is Big “I” senior director of federal government affairs.
