"Their current [MLR] requirements are much lower than the new 80% rule, so they will not be able to achieve this overnight," said Jinn-Feng Lin, director and actuary, Global Human Resource Services, PricewaterhouseCoopers. "They will likely take action to reconstruct their commission structure or even to get out of this line of business."
Brokers can earn 20% to 30% in first-year commissions, which represents a huge administrative expense, making it impossible for many carriers to comply with the minimum 80% MLR rule in the short term. "They are hoping for transitional relief that will take them into 2014," according to Lin, who noted that the MLR rules include how states can request wavers from HHS on behalf of their carriers.
The MLR rules also could mean big changes self-funded, employer-sponsored plans that rely on insurers to administer their policies, Lin said. "Although self-funded plans are not part of the MLR requirements, it might change the way they operate."
For instance, health plan call centers that offer nonclinical assistance to their members are considered an administrative expense, which may incite insurers to drop this service across the board.
Aside from some notable anomalies—some carriers are abandoning health lines and others are consolidating to take advantage of economies of scale in a more restricted operating environment?the health insurance industry will remain largely intact and operating with the goal of making a profit. Until 2014, that is, when the full force of ACA will be felt by health plans. What the industry will resemble then is anyone's guess. Stay tuned ...