The Agents Role – Part in the Medical Loss Ratio Calculation

Loss of Agent Services under Health Care Reform? Forbes 6.29.2012

MLR (Medical Loss Ratio)   define their commissions as part of the medical expense and failed.  The argument by insurance agents was a senseless argument.  healthcare exchanges under the new law.

These exchanges are not yet up and running but it is easy to picture them to be akin to Amazon.com (AMZN) by necessity and by law, insurance companies will have to display their products in easy to understand and easy to compare formats.  In some ways, the migration will be similar to the migration of retail from the likes of Best Buy (BBY), Barnes & Noble (BKS), and Borders to Amazon.com.  At least in retail there are numerous good reasons for the masses to go to the brick and mortar stores. With regard to health insurance the argument for procurement through agents is very weak. Forbes

The hope of the insurance agents had risen because of the recent backing  by the National Association of Insurance Commissioners.

In a recent ruling, the Department of Health and Human Services dashed all hopes.

Now the only hope left is H.R.1206, the Professional Health Insurance Advisors Act, a pending bill in Congress that would exclude compensation paid to independent insurance producers for the purposes of MLR.forbes.com

 THE MEMBERS OF THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS, THEREFORE RESOLVE THAT:

Congress should expeditiously consider legislation amending the MLR provisions of the PPACA in order to preserve consumer access to agents and brokers, and;

The Department of Health and Human Services should take whatever immediate actions are available to the Department to mitigate the adverse effects the MLR rule is having on the ability of insurance producers to serve the demands and needs of consumers and to more appropriately classify producer compensation in the final PPACA MLR rule. naic.org

The insurer has no incentive to operate more efficiently or to reduce premiums. Companies would pay brokers as much or as little as they want because any amount would be paid from increased premiums, and the 7.2 points of “excess” MLR could be shaved to please investors by further raising premiums.

The impact of the broker payment exclusion cannot be considered in a vacuum.

If broker commissions are not subject to those limits, insurance companies have every incentive to shift as much administrative burden to brokers as they can, because broker commissions would be subject to no limits. naic.org/

 

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