Proposed federal legislation removing costs associated with insurance brokers from the Affordable Care Act's medical loss ratio has reignited a debate about rising costs and consumer protections, with a new report from the Consumers Union contending that the legislation could lead to significant reductions in consumer rebates.
Nearly 13 million Americans have received rebates from their health insurer, or will soon, thanks to the MLR regulations, which requires insurers to spend at least 80 or 85 percent of premium dollars on healthcare or return the difference to members. Insurers have rebated their members about $1.1 billion so far, either in the form of a check or premium reductions.
The Access to Independent Health Insurance Advisers Act, or HR 1206, would remove broker and insurance agent compensation from the MLR, and could lead to rebates being reduced by two-thirds, the Consumers Union found in its report.
Building off a similar study by the National Association of Insurance Commissioners, Consumers Union found that if agent and broker fees and commissions were removed from the MLR, individuals, businesses and family households would have received some $676 million less in rebates in 2012. If HR 1206 was broadly interpreted to also exempt direct sales and salaries from the MLR, consumers would have received $722 million less in rebates this year, the report found.
The legislation would essentially lift the medical spending side of the MLR, said Blake Hutson, the Consumers Union outreach coordinator. Insurers that were below the 80 or 85 percent threshold might now meet it, Hutson said. "It pretty much completely undoes the medical loss ratio rule," Hutson said.
The National Association of Health Underwriters was pleased to see the legislation clear a House subcommittee. The bill "ensures that health insurance agents and brokers will continue to be able to help consumers find appropriate health insurance coverage, as well as use that coverage most effectively once it is purchased," NAHU CEO Janet Trautwein said in a statement online.
The Independent Insurance Agents and Brokers of America was similarly supportive, and pointed out in a statement on its website that the ACA doesn't specify how to classify independent agent compensation under the MLR. Federal regulators later classified agent compensation under the "non-claims costs" category under the MLR. HR 1206 is more of a clarification, the group said.
[See also: Automating to cut MLR: Q&A with Cox Health Plans]
The legislation has bipartisan backing, and lawmakers are citing concern for the viability of brokers. "Many brokers are being forced to reduce client services or close their doors altogether due to unintended consequences of these regulations," Louisiana Senator Mary Landrieu, a Democrat, said when she introduced the Senate version of the legislation earlier this year. "This is about strengthening the Affordable Care Act and ensuring that these small independent firms can stay in business and continue to provide critical services to consumers."
Citing a survey from the National Association of Insurance Commissioners, Hutson, from the Consumers Union, said that insurance brokers are declining in some places but aren't likely to go extinct as some have feared. In an NAIC survey of some 350 brokers released last November, 80 percent reported decreased commissions since passage of the MLR regulations, and 52 percent reported compensation dropping by 25 percent or more. Later last year, after a lot of debate, NAIC voted to support removing brokers fees from the MLR calculation.
America's Health Insurance Plans also noted its support for the legislation in a blog post and argued more broadly that the the MLR isn't really a solution to growing healthcare costs. Citing federal data, AHIP said 96 percent of the increase in premiums over the past five years were due to rising medical costs, not administration.