NAIFA Survey Shows Federal Health Care Rule Harming Agents and Consumers

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State insurance commissioners vote in favor of preserving consumer access to agents, but federal action is needed.

A new survey by the National Association of Insurance and Financial Advisors (NAIFA) shows the federal health care law’s medical loss ratio (MLR) provision is threatening the ability of insurance brokers to make a living and hurting consumers who rely on these professions for advice and customer service. At the same time, state insurance commissioners passed a resolution today recognizing that the MLR is disrupting insurance markets and harming consumers.

The MLR provision, which requires insurers to spend at least 80 percent of individual and small group health insurance premiums and 85 percent of large group policies on medical or quality improvement expenses, prompted most insurance companies to slash the commissions of insurance agents and brokers when it went into effect last January.

MLR Causes Steep Declines in Broker Pay

The NAIFA survey of 378 members who sell health insurance found that 80 percent have seen decreased commissions since the MLR went into effect, including 52 percent who have seen compensation drop by 25 percent or more. An additional 12 percent said insurers have told them commissions will be going down in the near future. At the same time, 94 percent of the respondents said their clients’ premiums either have increased or are set to increase this year.

“Health insurance agents and brokers don’t merely sell insurance, they perform crucial services for their clients,” said NAIFA President Robert Miller. “They help companies select the right plans for their employees and help individuals understand their coverage and fix problems with claims. For many small businesses, health insurance brokers act as de facto human resources departments. By and large, brokers don’t receive additional compensation for these services.”

A White Paper by NAIFA featuring interviews with NAIFA members examines the damage done by the health care law’s MLR Rule

Consumers Suffer the Consequences

According to the NAIFA survey conducted Nov. 18-22, nearly a quarter of the brokers and agents (22.4 percent) have had to reduce customer service because of the lost compensation. Another 29 percent say they will do so if their commissions remain depressed. One out of five of the brokers surveyed said they have had to lay off employees or reduce the hours of customer-support staff.

“Consumers are the ones who are really hurt by this, because brokers simply can’t afford to provide the same high level of service after seeing their pay cut by 25 or 50 percent,” Mr. Miller said. “They’re having trouble paying staff, which means there are fewer people to solve clients’ problems and answer questions, even as the health care system grows ever more complicated.”

State Insurance Commissioners Urge Change

Meanwhile, some government officials have begun to acknowledge the damage being done by the MLR provision. The National Association of Insurance Commissioners (NAIC) late yesterday approved a resolution in favor of preserving consumer access to agents and brokers. This follows a similar resolution passed by the National Conference of Insurance Legislators in July.

“NAIFA is pleased that the NAIC has recognized the adverse effects the MLR is having on the ability of agents to serve consumers,” said Mr. Miller. “The commissioners are well respected and have a long history of protecting consumers and ensuring the stability of the insurance market. Their opinion rightfully carries weight among decision makers in Washington.”

“Now it’s time for our leaders in Washington to act,” Mr. Miller said. The Department of Health and Human Services should place an immediate hold on implementation, and Congress should pass a law to remove commissions from the equation. Rep. Mike Rogers (R-MI) and John Barrow (D-GA) have introduces a bipartisan bill in the House of Representatives that would do just that, Mr. Miller said

About NAIFA: NAIFA comprises more than 600 state and local associations representing the interests of approximately 200,000 agents and their associates nationwide. NAIFA members focus their practices on one or more of the following: life insurance and annuities, health insurance and employee benefits, multiline, and financial advising and investments. The Association’s mission is to advocate for a positive legislative and regulatory environment, enhance business and professional skills, and promote the ethical conduct of its members.

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Mark Briscoe
NAIFA
703-770-8111
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Sheila Owens
NAIFA
703-717-8119
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