MLR May Sting, but HIEs Could KO Health Insurance Brokers

Jeff Elliott, for HealthLeaders Media , March 23, 2011

The debate over medical loss ratio and other health plan restrictions outlined in the healthcare reform package places big insurance companies and their financial interests front and center. As you well know, MLR rules demand that health plans in the large group market devote 85 percent of premiums (80 percent for those in small and individual lines) to medical care and quality improvement activities.

While health plans are largely opposed to this requirement, it's not anticipated to drastically affect the major companies, some of which claim to be operating within this range already. But there is another segment of the health insurance industry—health insurance agent and brokers—that will indeed feel the pinch from MLR rules to the extent that many feel their livelihood is in jeopardy.

That's why health insurance agents and brokers, some 500,000 strong, are applauding an Affordable Care Act amendment introduced by Reps. Mike Rogers (R-MI.) and John Barrow (D-GA), which would exempt broker commissions from the 80 percent rule.

According to the National Association of Health Underwriters, MLR rules classify agent commissions as an administrative expense, "even though agent commissions have never been part of an insurance company's actual revenue," said NAHU president Janet Trautwein.

While the legislation might be designed to preserve an at-risk industry segment, it may only serve to quell the bleeding that has already begun. NAHU says that more than half of brokers it surveyed report that some clients have dropped their coverage because of healthcare reform. The law has also caused employers to lay off workers or avoid hiring new ones, says NAHU "Forty percent of brokers state that their clients have eliminated jobs, and 57 percent have seen businesses reduce hiring."

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3 comments on "MLR May Sting, but HIEs Could KO Health Insurance Brokers"

Bob McNett (4/1/2011 at 3:11 PM)
Obviously the "so be it" commentator is not a small business owner or someone hard-pressed to find insurance as an individual. I know that all our customers, mostly small-to-medium sized businesses and some individuals, appreciate our services. They hire us for the same reason they hire an attorney, CPA or other professional. We help them navigate the system when [INVALID]ing a group or individual health plan, and, more importantly, assist with claims problems, billing questions and other service needs throughout the year. Any critics of how brokers are paid that I have heard do not include business owners or people buying insurance on their own. The critics are those who get their coverage thru a large company or perhaps a government worker, that have never been in a position to use the services of a health insurance broker, and therefore have no idea what they are talking about.

Bill Hammett (3/24/2011 at 12:19 PM)
Agents and brokers provide an invaluable service to the consumers. We help navigate through hundreds of options, spreadsheet the very best alternatives to the current offering, help employees, individual and seniors enroll in plans. When there is an issue with a claim denial, lost ID card or trying to find a provider...the agent/broker community is the one that fixes it. With a diminished agent/broker population the end user would have to work directly with the insurance company to solve these problems...neither of these parties are set up or equipped to handle these issues...because of this productivity will be lost by the employee or individual and administrative costs will soar at the insurance company level. This will ultimately increase costs. So, you see, insurance agents and brokers help make the system more efficient and thus keep costs down. This is why commissions for our population should not be counted in MLR.

ET (3/23/2011 at 1:25 PM)
Premium dollars paid to agents and brokers contribute nothing to medical care or quality improvement. Whether premium dollars are retained by the insurer, or paid out to agents and brokers as commissions, they are dollars that do NOT go toward medical care or quality improvement. Clearly these are administrative expenses. If the agent/broker market segment suffers as a result, well, in the words of the esteemed Speaker of the House, "So be it."




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