Earlier this month, the federal government announced that unemployment has barely budged in the last two months. More than 13 million people remain out of work. And yet several consumer advocates are leading the charge in support of a provision of the federal health care law that could eliminate scores of jobs throughout the country.
At issue is the law’s “medical loss ratio,” which requires insurers to spend at least 80% to 85% of the premiums they take in on medical claims. Fortunately, several lawmakers and the National Association of Insurance Commissioners are considering a job-saving tweak to the health care law that would exclude brokers’ commissions when calculating the MLR.
Without the fix, thousands of insurance agents and those who work at their agencies would be consigned to the unemployment lines — thereby depriving consumers of valuable advocates in the health care marketplace.
The MLR requirement is deeply unpopular. Eight states have now requested waivers from the new rules; Maine just received one. All these states are concerned that the regulations will disrupt their insurance markets by driving small insurersÂ that can’t afford to comply out of business.
In Maine, for instance, one of the state’s three active insurers threatened to pull out of the market unless the state received a waiver. Such a move would haveÂ left Maine residentsÂ with just two choices for insurance — and by reducing competition, would haveÂ driven up prices.
The MLR rules may disrupt state insurance markets in another way — by depriving consumers of access to licensed agents and brokers.
In order to abide by the rules, some insurers are paring back agents’ commissions. According to a recent survey, nearly three-quarters of agents have reported reductions in their business income because of the MLR. More than a fifth of brokers have eliminated jobs at their agencies as a result. A quarter have reduced services for their clients in order to make ends meet.
That’s bad news for small businesses, many of which depend on agents to take care of their health insurance needs. In fact, the nonpartisan Congressional Budget Office has reported that agents and brokers often “handle the responsibilities that larger firms generally delegate to their human resources departments — such as finding plans and negotiating premiums, providing information about the selected plans, and processing enrollees.”
Small firms also count on brokers to keep them in compliance with a veritable alphabet soup of state and federal laws — and informed of any opportunities to save money on their plans.
Individual consumers will also suffer if they lose access to agents. Most consumers are unfamiliar with the jargon that may dot their policies — and thus rely on their brokers to explain their benefits and serve as advocates on their behalf should problems arise.
Proponents of the reform law’s existing MLR rules argue that broker commissions should count as administrative costs because they are not medical spending. But the truth is far more complicated.
Broker commissions are actually separate from an individual’s or business’s insurance premium. They’re not revenue for an insurance company, as they simply pass through the insurer and go directly back to the agent. It’s a matter of convenience for consumers. Rather than writing two checks — one to the insurer for coverage and one to the agent for serving as an advocate — a person or firm writes just one.
Many lawmakers have recognized that the MLR rules must be fixed in order to preserve agents’ important role in the health care marketplace. Reps. John Barrow (D-Ga.) and Mike Rogers (R-Mich.) have introduced a bill in the House of Representatives that would fix the MLR rules to leave commissions out of the calculation. Their measure has attracted support from Republicans and Democrats alike.
The Obama administration has championed itself as a friend of small businesses, calling them “the backbone of our economy and the cornerstones of our communities.” But the MLR rules undermine that claim. By driving scores of insurance agencies to the brink of bankruptcy — and killing scores of small-business jobs in the process — the MLR rules are making the health insurance marketplace even less accessible for everyone else.