Bill would exclude agent commissions from MLR

Reps. Mike Rogers (R-Mich.) and John Barrow( D-Ga.) have introduced a bill that could keep agent commissions out of medical-loss ratio calculations. Rogers and Barrow lined up 14 cosponsors for the bill, the Access to Professional Health Insurance Advisors Act of 2011 (H.R. 1206), reports National Underwriter.

The bill is one of several attempts of the insurance industry to free insurers from having to include agent compensation in their administrative costs.

As a result of the medical-loss ratio requiring insurers to spend 80 percent to 85 percent of premiums on medical costs, many health payers have been cutting commissions paid to agents by up to 50 percent because agent compensation must come from insurers' administrative expenses, according to the Insurance and Financial Advisor. However, it is unclear whether insurers would increase their compensation to agents and brokers if the law passed.

"Agent compensation is passed-through by the insurance carrier from the consumer to the agent and is only collected as part of the premium as a convenience," said Robert Rusbuldt, president and CEO of the Independent Insurance Agents & Brokers of America. "This compensation is not insurance company revenue and therefore should not be part of the MLR formula, and the Rogers-Barrow legislation is a crucial technical fix to correct this error."

In addition to the bill, the National Association of Health Underwriters and the National Association of Insurance and Financial Advisors have been encouraging an exemption from the MLR calculations for agent and broker compensation. "Agent commissions have never been part of an insurance company’s actual revenue," NAHU says. "Without agents' expert advice, many individuals and businesses will end up spending more for health insurance policies and receive less care," reports National Underwriter.

To learn more:
- read the Insurance and Financial Advisor story
- see the National Underwriter piece

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