MLR causing premium drops, broker fee cuts

Despite decreasing premiums and cutting brokers' fees in an attempt to meet the new medical-loss ratio (MLR) requirements, most insurers still had MLRs that exceeded the law's limits, a new report from the Government Accountability Office (GAO) found.

The GAO interviewed insurers--although it didn't provide company names--about the early impact of the MLR. Most of the insurers said the deduction of taxes and fees in the new MLR formula caused the largest change in their MLRs last year. Improving healthcare quality also affected their MLRs, but to a lesser extent. One insurer said subtracting those initiatives might shave 0.5 percent off of total administrative expenses, reports The Hill's Healthwatch.

Three insurance companies told the GAO that they either will decrease premiums next year or increase them by a smaller amount than they would have without the MLR.

Meanwhile, "almost all" of the insurers said they are cutting commissions, which allows the plans to change their premiums. One insurer said it started cutting brokers' individual and small group product commissions toward the end of last year, and those cuts helped hold down premiums, according to the National Underwriter. Another insurer said it will reduce commissions next year while trying to manage costs by reducing the number of in-network physicians.

The MLR rules' effect on where insurers do business also varied. One insurer told the GAO it has considered exiting the individual market in some states in which it likely won't meet the MLR requirements. Yet several other insurers said that the MLR requirements aren't a factor in determining where they do business, reports the Insurance and Financial Advisor.

To learn more:
- read the GAO report
- read The Hill's Healthwatch article
- check out the National Underwriter article
- see the Insurance and Financial Advisor article

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