Broker Fees Are Focus of Latest Bill
to Revamp Health Law
A bipartisan group of House members wants to alter a new consumer protection in the
health care law, and their proposal is getting strong support from the president-elect
of the National Association of Insurance Commissioners, who is advocating for the
change at the group's national meeting this weekend. However, the bill faces an
uncertain future because it is already running into strong resistance from Senate Democrats.
The measure (HR 1206), from Michigan Republican Mike Rogers and Georgia Democrat
John Barrow, would exempt fees charged by health insurance brokers from being classified
as administrative costs under the law's new medical loss ratio regulations. The regulations
require insurers to spend at least 80 percent of subscribers' premium dollars on medical
care, rather than on administrative costs such as executive salaries, overhead,
marketing and profits.
Brokers, however, complain that insurance companies are cutting their commissions as
a way to trim administrative costs. Although the bill boasts bipartisan sponsorship,
all four of the Democratic cosponsors voted against passage of the health care law
(PL 111-148, PL 111-152) last year. Still, the proposal is one of the few areas where
members of both parties are finding common ground to change the law, rather than
fighting over its repeal.
The measure has earned praise from Energy and Commerce Chairman Fred Upton, R-Mich.,
and aides said they were optimistic that a hearing on the bill would be scheduled soon.
"These folks can help explain to consumers the many changes taking place in the
health care world over the next few years, and so it's important that our insurance
agents are not hampered by provisions in the new health care law," said Barrow.
"This is another critical improvement that needs to be made to the health care law."
The measure also stands to gain a boost this weekend when the National Association
of Insurance Commissioners (NAIC) meets to discuss the issue at its national meeting
in Austin, Texas. Florida Insurance Commissioner Kevin McCarty, president-elect
of the NAIC, is circulating a draft letter that asks Health and Human Services
Secretary Kathleen Sebelius to delay implementing the part of the medical loss
ratio regulation that classifies agents. and brokers. fees as administrative expenses.
The delay would give Congress time to choose whether to act on the legislation, and
"the markets would have the ability to sort out this thorny issue over time as they
adjust to the new realities of health insurance in 2014," the draft letter says.
McCarty and the National Association of Health Underwriters, which represents agents
and brokers, have been urging the NAIC to reverse its position and not count brokers'
fees as administrative expenses.
Those advocating for the change say the regulation is forcing insurers to slash sales
commissions, resulting in job losses for agents and brokers. If insurers do not meet the
law's standards for premiums spent on medical care — 80 percent for individual
policies and 85 percent for big groups — they must issue rebate checks to consumers
the next year.
But Senate Democrats who fought for tough medical loss ratio regulations say the
modification would weaken one of the main consumer protections in the law.
Sen. Al Franken, D-Minn., wrote to several Senate committee leaders Wednesday asking them
to oppose any companion legislation in the Senate. No such bill has been introduced yet,
although a House aide said some senators had indicated interest in the legislation.
Franken said the Rogers bill "would undermine the integrity of the [medical loss ratio]
provision by allowing money that should be spent on health care costs to be spent on
commissions for insurance agents and brokers."
"Such legislation could jeopardize one of the best cost-containment provisions
passed by Congress," Franken said in the March 23 letter to the chairmen and ranking
members of the Health, Education, Labor and Pensions Committee and the
Sen. John D. Rockefeller IV, D-W.Va., also asked the NAIC to maintain its position on
broker fees, saying the issue had already been resolved. He noted that agent and broker
commission payments are among the largest administrative expenses for insurers and
have risen rapidly in recent years.
The change would "allow the health insurance industry to retain a large portion of the
billion or more dollars in premium cuts and rebates that the current law requires it to
share with American consumers in early 2012," Rockefeller wrote in a letter to NAIC
President Susan E. Voss earlier this month.
If it does reverse its stance on the brokers. fees, the NAIC would join the agents' group
and insurer groups in supporting the Rogers measure.
"The current [medical loss ratio] regulation threatens to disrupt the coverage that many
individual and small-group customers have today as well as threaten consumers' and
small employers' access to the guidance of a trusted and experienced health benefits
adviser," said America's Health Insurance Plans spokesman Robert Zirkelbach.
By Emily Ethridge, CQ Staff