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| Congressional Budget Office to Re-Evaluate MLR Legislation |
NAHU is the leading advocate of H.R. 4575 and S. 2303, bipartisan legislation in both the House and Senate that would modify the ACA’s medical loss ratio formula to treat broker commissions as pass-through expenses. Earlier this week, NAHU’s government affairs staff members met with analysts at the Congressional Budget Office on a forthcoming report on the impact of this legislation. This would be the first analysis of the MLR legislation since 2012, when H.R. 1206 was determined to cost the federal government roughly $1 billion over a 10-year period on the basis that fewer carriers would issue rebates. A new report will have significant consequences on the ability to advance this legislation during the remainder of the 115th Congress.
The MLR requirements were designed to limit the amount that insurance companies can spend on administrative costs. It requires insurers in the individual and small-group markets to spend at least 80% of their premium income on healthcare quality and the remaining 20% on administration, marketing and profit. Insurers in the large-group market must meet a ratio of 85%-15%. Unfortunately, the way the requirements were crafted, independent insurance agent and broker commissions are included as an insurer administrative cost. When the requirements took effect in January 2011 they immediately had devastating impacts on the insurance markets and on broker compensation, and have since then led to many cases where commissions have been eliminated altogether.
NAHU has long advocated that the MLR should treat broker commissions as pass-through expenses for the following reasons:
- Commissions are set by insurers but not paid by the insurers. Commissions are paid by the client and passed through carrier to the agent. While carriers currently collect agent compensation along with the regular premium, these funds are passed directly to the broker.
- Commissions are paid to health insurance agents and brokers for the enrollment and ongoing service they provide to consumers throughout the duration of their policy.
- As a result of agent compensation being included in the cost of MLR, brokers servicing the individual and small-group markets are seeing their compensation slashed by as much as 50%.
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Individuals and employers across the country are relying on their health insurance agent to help them understand and comply with health reform for their business, their employees and themselves.
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The MLR has caused serious harm to the insurance market as it has inhibited the number of insurers willing to write health insurance in the individual and small-group markets.
The pending NAHU-backed legislation has bipartisan support and is led by Representatives Billy Long (R-MO) and Kurt Schrader (D-OR) and Senators Johnny Isakson (R-GA) and Chris Coons (D-DE). NAHU has maintained a vigorous advocacy campaign on the issue since it was first introduced in 2011 during the 112th Congress, when it was led by Representatives Mike Rogers (R-MI-8) and John Barrow (D-GA-12) along with Senators Mary Landrieu (D-LA) and Johnny Isakson (R-GA). NAHU continued our push through the 113th and 114th Congresses with legislation led by Representatives Long and Schrader and Senators Isakson and Coons.
The current legislative push addresses many of the primary concerns that drove the high “score” of the legislation in 2012. This includes removing language that accounted for roughly half of the 2012 score that have expanded state waiver authority making it simpler for states to obtain individual market waivers and also obtain small-group market waivers to the MLR provisions. The new legislation also only exempts independent insurance commissions in the individual and small-group insurance markets, not large-group fully insured policies that had accounted for a significant portion of the previous bill score.
NAHU remains optimistic that the bipartisan legislation can be advanced during this current congressional term. Many legislators have had a renewed interest in passing bipartisan fixes to the ACA after the efforts to make sweeping changes, including repealing the MLR formula entirely, stalled last year. NAHU is hopeful that the analysis by the CBO will help to renew interest in the issue as a bipartisan solution to provide much needed consumer improvements. NAHU has advocated that doing so would encourage greater small-group and individual-market competition, positively impacting consumers, issuers and the marketplaces in the long run.
In addition to our legislative push, we are continuing to push the Trump Administration to use its regulatory authority to redefine the MLR formula, which the Obama Administration repeatedly argued it did not have the ability to do.
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