House Commerce Committee Approves Bill To Exclude Commissions From Loss Ratio

The House Energy and Commerce Committee Sept. 20 approved by a 26-14 vote a bill that would help protect health insurance brokers from cuts in commissions resulting from the medical loss ratio (MLR) provision of the Affordable Care Act.

The Access to Professional Health Insurance Advisors Act (H.R. 1206), introduced by Reps. Mike Rogers (R-Mich.) and Rep. John Barrow (D-Ga.) in 2011, would exclude brokers' commissions from MLR calculations. The bill has 220 bipartisan co-sponsors. Barrow was the only Democrat on the Energy and Commerce Committee to vote for the bill, while all 25 Republicans who were present at the markup voted to approve it.

Similar legislation has been introduced in the Senate (S. 2288) by Sen. Mary Landrieu (D-La.), and also has bipartisan support. No action has been scheduled for the Senate bill.

Under the ACA, large group health insurance plans must spend at least 85 percent of premiums on medical claims or quality improvements, and small group and individual plans must spend at least 80 percent. Plans that do not spend that amount must refund the difference to consumers every year.

Because brokers' commissions are counted as administrative expenses under the MLR provision, it has led insurers to reduce broker commissions to help prevent paying rebates. Brokers' groups have called for Congress to approve legislation excluding their commissions from the MLR calculation.

Lower Commissions for 70 Percent of Brokers.

In May the National Association of Insurance and Financial Advisors, which represents insurance brokers, released a report finding that 70 percent of health insurance brokers had experienced decreased commissions since the MLR took effect in 2011 (see previous article).

In a statement, Energy and Commerce Committee Chairman Fred Upton (R-Mich.) said the bill “will help stem the negative impacts of the MLR on America's agents and brokers, many of whom are small businesses. This bill will also ensure families and employers continue to have access to qualified professionals who can assist them in finding an affordable, high quality health plan.”


H.R. 1206 “will help stem the negative impacts of the MLR on America's agents and brokers, many of whom are small businesses.”  


--Rep. Fred Upton, Energy and Commerce Committee chairman

The administration argues that the MLR has helped keep health insurance premiums lower by forcing insurers to operate more efficiently. The Department of Health and Human Services June 21 estimated that 12.8 million policyholders will benefit from $1.1 billion in rebates from health insurance plans that did not spend as much as required on medical claims and quality improvements in 2011 (see previous article). The average family rebate was $151, HHS said.

At the markup, Energy and Commerce ranking member Henry Waxman (D-Calif.) said H.R. 1206 “will increase the cost of health insurance.” Commissions have traditionally been recognized as part of administrative costs, he said. “This bill would reverse this, and cause the consumer to pay more for coverage or get less in benefits,” he said. Nearly 90 percent of all insurers have met the MLR requirement while continuing to pay agents and brokers, he said.

States Could 'Effectively Eliminate' Provision.

In addition, the bill would allow states to “effectively eliminate” the provision, Waxman said. The ACA allows states to apply for waivers if they can show that access to agents and brokers or to health insurance could be harmed by the MLR, he noted. The bill would expand that provision by allowing states to waive the provision without proving need, he said.

Ten states sought waivers from the provision in 2011 and 2012 but were turned down by HHS, which ruled they had not shown the provision would reduce access to agents and brokers, Waxman noted. If those waivers had been granted, premiums would have been $360 million higher for about 4 million consumers in those states, he said.


Rep. Henry Waxman argues that the bill “will increase the cost of health insurance.”  


Consumer and patient groups also oppose the bill. Consumers Union released a report Sept. 19, Rebates Lost: Measuring the Impact of H.R. 1206 on Health Insurance Rebates, which estimated that the legislation could cut rebates from $1.1 billion to as little as $378.8 million.

The American Cancer Society Cancer Action Network (ACS CAN) and the American Heart Association issued a joint letter to House members Sept. 10 opposing the bill. “Removing these sales costs from the MLR formula will reduce the incentive for insurers to be more efficient and spend premium dollars for their intended purpose--paying medical claims and improving care,” the groups said in the letter, signed by ACS CAN President Christopher Hansen and Mark Schoeberl, the heart association's executive vice president for advocacy and health quality.

MLR Having 'Devastating' Impact on Brokers.

Janet Trautwein, chief executive officer of the National Association of Health Underwriters, which represents about 100,000 health insurance agents and brokers, said in a statement that the MLR is “having a devastating financial impact on the country's approximately half-million licensed professional health insurance agents and brokers, their employees, and millions of their employer and individual clients. While we agree with the goal of providing consumers with more value for health care dollars spent, the MLR requirements significantly and negatively impact access to health insurance agents and brokers, at the very time our economy and health care consumers need the most help,” she said.

America's Health Insurance Plans (AHIP), which represents about 1,300 insurers covering 200 million people, posted a blog on its website supporting the legislation. The MLR “is not a real cost containment solution,” AHIP said. “Soaring medical costs--not health plans' administrative costs--are driving health care cost growth,” it said. Federal government data show that 96 percent of the increase in premiums over the past five years was due to increased spending on health care services, it said.

In addition, the provision “places an arbitrary cap on what health plans can spend on a variety of programs and services that improve the quality and safety of patient care, help patients navigate a complicated delivery system, and help control soaring medical costs,” AHIP said.

Medicare Secondary Payer Bill Approved.

The committee also approved by voice vote H.R. 1063, the proposed Strengthening Medicare and Repaying Taxpayers Act, which would streamline the process by which Medicare handles settlements from secondary payers in cases such as auto accidents and liability settlements.

The Centers for Medicare & Medicaid Services issued an advance notice of proposed rulemaking June 14, outlining conditions under which the agency would not pursue reimbursements from beneficiaries who receive such settlements (see previous article).

By Sara Hansard  

Information on H.R. 1206 and H.R. 1063 is at Rebates Lost: Measuring the Impact of H.R. 1206 on Health Insurance Rebates is at