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Health Insurance Brokers Win A Round
Score one for the health insurance brokers in their fight to avoid going the way of buggy-whip manufacturers.
A task force of the National Association of Insurance Commissioners voted Thursday to endorse legislation that would effectively spare their commissions from being counted as administrative costs.
And consumer groups aren't happy about it.
The bill, introduced in March by Reps. Mike Rogers (R-MI) and John Barrow (D-GA) would exempt broker commissions from what's known as the medical loss ratio that's stipulated in last year's Affordable Care Act.
Under the law, insurers who fail to meet certain minimum thresholds for returning each premium dollar in the form of actual benefits would have to provide rebates to policyholders.
Under the rules as they're currently written, agent and broker commissions are considered administrative expenses. So they count against the total 15 or 20 percent insurers are allowed to spend on things other than direct medical benefits.
The Rogers-Barrow bill — endorsed by the NAIC professional health insurance advisors task force — would exempt those fees from what's counted as administrative expenses for the purpose of calculating the medical loss ratio. That treatment would make it more likely that insurance companies would keep paying brokers and agents.
Now, the endorsement must still be approved by the full executive committee of the NAIC, and, obviously, the bill must be passed by Congress for the change to be made.
Still, consumer advocates were infuriated by the move. Here's how 10 consumer reps to the group put it in a letter:
The NAIC's study estimated this change would cost consumers $1.27 billion in rebates. It would also take the pressure off of insurers to reduce premiums. As the purchase of insurance is heavily subsidized by federal tax expenditures, this legislation will also increase the federal budget deficit.
Carmen Balber of the group Consumer Watchdog put a point on it: "The insurance regulators who voted for this plan sold consumers in their states down the river by endorsing higher health insurance premiums and millions in lost rebases to benefit their friends in the insurance industry."