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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