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Insurance Commissioners Back Away From Broker Bill

This post was updated at 5:47 p.m.

Brokers hoping that the nation’s top insurance regulators would endorse a controversial bill now pending in Congress had their hopes dimmed Tuesday.

“We’re looking for solutions other than changing federal law,” said Kevin McCarty, Florida’s insurance commissioner.

Late last month, a McCarty-headed committee of the National Association of Insurance Commissioners recommended endorsing the bill sponsored by Mike Rogers, R-Mich., which would remove sales agent fees from the administrative costs insurers must report under a provision in the 2010 federal health law.  The committee sent along its recommendation and a report to the NAIC’s executive plenary.

But when the executive committee of the NAIC met by phone Tuesday afternoon for what could have been a contentious debate over whether to endorse the bill, McCarty said he would not call for a vote, but instead said continuing “discussions with HHS to see if we can find a solution that addresses the issue” would be the best course at the moment.

Proponents of the Rogers bill say it would help protect sales agents jobs – and, with it, their ability to help consumers in the complicated task of buying health insurance.  They point to anecdotal evidence that some insurers are already cutting agents sales commissions in order to meet spending requirements of the health care overhaul law.

The Rogers bill would make it easier for insurers to meet the federal requirement that they spend at least 80 percent of revenue on medical care, leaving 20 percent for other costs, such as sales and marketing, profits and executive compensation.  Insurers that don’t meet that spending target, known as the “medical loss ratio”  must issue rebates to consumers.  The Obama administration estimates that starting in 2012 the MLR provisions may result in as many as 9 million people being eligible for rebates totaling $1.4 billion.

Last year, the NAIC recommended to federal officials that broker fees be included in the medical loss ratio. That recommendation was accepted.  To remove broker fees from the calculation would take congressional action.

McCarty’s office issued a statement after the meeting saying the call was an update and that no vote had been scheduled. McCarty, it said, continues to “support the underlying purpose of the Rogers’ bill, which is to maintain the role of agents, and fair compensation for health insurance agents.”

Janet Trautwein, who heads National Association of Health Underwriters, says agents and brokers would like the NAIC endorsement of the Rogers bill and have not given up hope.

Speaking of McCarty, Trautwein said, “What some people thought he meant was that [the NAIC] was done and finished” with its discussion of the possible endorsement.  “That was not our understanding at all.”

Consumer groups, which oppose the Rogers bill, say agents’ fees are clearly administrative costs and should be included.

Tuesday’s action pleased Ethan Rome, executive director of the left-leaning Health Care for America Now, an advocacy group in Washington D.C.

“It sends a clear message to Congress, which is that this is too divisive of an issue,” said Rome. “Under current law, consumers and small businesses are going to see billions in rebates, which, if the Rogers bill is passed, would be taken away.”