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By Jeff Jeffrey |
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A.M. Best Company, Inc. |
U.S. Sens. Mary Landrieu, D-La., and Johnny Isakson. R-Ga., have introduced legislation that would exclude agent and broker compensation from the Patient Protection and Affordable Care Act's medical loss ratio requirement.
Under PPACA, health insurers are required to devote 80% of the premiums they take in on policies sold to individuals and small groups to medical costs. For large group policies, the medical loss ratio target is 85%. If companies don't meet those requirements, they must pay rebates to consumers (BestWire, March 26, 2011).
The U.S. Department of Health and Human Services has determined that agent compensation should be included in the MLR formula as a part of the "nonclaims costs" category.
Agent and broker trade organizations have argued that the MLR requirement has unfairly affected their businesses because their commissions are tabulated as administrative costs. The Independent Insurance Agents & Brokers of America has said that insurers have used the MLR requirement as an excuse to cut commissions by as much as 60%.
"We are extremely grateful to Senators Landrieu and Isakson for filing this bill as it would provide agents relief from the MLR regulation which has resulted in devastating consequences for our small business members," said Robert Rusbuldt, president and chief executive officer of IIABA. "We urge both Senate and House leadership to quickly act on the Landrieu-Isakson legislation and the companion Rogers-Barrow legislation that is pending in the House of Representatives."
Landrieu has spoken out on the MLR issue in the past. During a speech to IIABA members in April, Landrieu pledged to work with IIABA to help "fix" the issue (Best's News Service, April 14, 2011).
The Landrieu-Isakson bill, SB 2068, follows similar legislation introduced in the U.S. House of Representatives last year by U.S. Rep. Mike Rogers, R-Mich., and U.S. Rep. John Barrow, D-Ga. (Best's News Service, March 18, 2011). That bill ultimately failed to gain traction among House legislators.
The MLR issue has also created a rift among state insurance commissioners. The issue has been one of the most hotly debated questions before the National Association of Insurance Commissioners.
Federal Insurance Officer Michael McRaith, who previously served as Illinois' insurance director, has said that he doesn't think legislation changing how MLRs are calculated is necessary. McRaith has said it is the insurers themselves who should ante up to ensure broker commissions aren't affected by PPACA (Best's News Service, April 14, 2011).
(By Jeff Jeffrey, Washington Correspondent: jeff.jeffrey@ambest.com)
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(c) 2012 A.M. Best Company, Inc. |
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