Health Insurance Commissions Impacted by the MLR

Though health care reform has its seemingly good intentions, those who currently sell health insurance have their jobs on the line and highly risk pay cuts, loss of employment, and elimination of commissions. Brokers and agents whose commissions are their livelihood are at the effect of the Medical Loss Ratio’s rules including decreased pay and bonuses within health insurance companies.

Due to the Affordable Care Act and the Medical Loss Ratio (MLR), major health insurance companies have been asked to decrease their internal spending to put more emphasis on their quality of care. This came as an initial scare to health insurance agents, as it seemed it would naturally include their paychecks.

However, at the end of 2011, the National Association of Insurance Commissioners (NAIC) actively made a point to approach the Department of Health and Human Services (HHS) regarding the exemption of health insurance broker and agent payment from MLR.

The Medical Loss Ratio originally stated that insurance companies must budget their spending more fiscally on company costs, including bonuses, and use at least 80% of income from premiums for improving quality. They are required to only pay for necessary administrative costs. After the NAIC proposal was received, the HHS released a final MLR statement which does include agent and broker compensation as an administrative cost. Thankfully, this does not require any health insurance companies to decrease regular pay.

Currently pending in Congress are two bills HR 1206, the Professional Health Insurance Advisors Act, and Senate Bill 2288, which hold the possibility of MLR revision to include broker commissions as an administrative cost. These have been pending for over a year, and are now taking new urgency. Thus far, changes have been evident in bonuses for many agents.

According to an April 2012 survey from the National Association of Insurance and Financial Advisors (NAIFA), the MLR has made significant alterations in the payment of brokers and the threat of downsizing. The survey revealed that 70% of NAIFA members selling group medical insurance have seen a commission decrease. The survey also showed that 14% stated they have considered cutting employees, and 21% said they will eliminate brokers if commissions continue to be minimized. 11% of members surveyed have left the market for individual policies, which is promising to the individual market, though leaves job opportunities a bit more narrow.

This is bound to result in poor customer service, and therefore decreasing the quality of care in an essential area of health insurance. Keeping people employed and paid adequately is an important detail to consider when thinking about whether the MLR will actually improve the way care is delivered. A great piece of the what a well-run health insurance company entails is those who sell the policy in the first place, answer questions regarding plans, and doing so in a cordial (not bitter) manner.

Medical insurance trade groups such as NAIC and the National Associations of Health Underwriters (NAHU) have been actively lobbying at local, state, and federal levels to further emphasize the need to exclude broker commissions from the MLR. For the time, it seems the individual market is safe, though we will keep the brokers of the U.S. and potential agents current as to the final ruling when it occurs.

About B. Somers

B. Somers is a contributor to Health Insurance News, focusing on medical coverage, carriers, health reform and the conflicts surrounding insurance. Writing for the company's sites has provided a strong introduction to health insurance, and the opportunity to gain knowledge in the insurance industry.