By Barb Yondorf

Health insurance agents and consumer advocates are the major combatants in a battle over a critical Affordable Care Act (ACA) provision that limits how much insurers can spend on administrative expenses as opposed to paying your health care bills.  This means when insurers fall below the minimum ratio of total health care pay-outs to total expenses–known as the medical loss ratio or MLR– policyholders must be rebated the difference.

Make your voice heard — Write to Senators Bennet and Udall asking them to oppose S.2068, and protect the MLR!

Health insurance agents fiercely oppose including their commissions, fees and bonuses in the calculation of administrative costs, as current law requires.  They are the main backers of a recently introduced U.S. Senate bill (S. 2068) that would remove agent compensation from the MLR. Agents and brokers worry that insurance companies will reduce their commissions or find other, less expensive ways to market their products in order to meet the minimum MLR requirements. 

Not counting agent costs as an administrative expense makes no sense.  This is like saying the commission a car salesman receives from the dealer for selling you a car is not part of the dealer’s cost of doing business.  By playing around with the definition of what constitutes an administrative cost (prior to the passage of ACA,  the MLR formula always counted agent compensation as an administrative cost),  we enter the world of Alice Through the Looking Glass—”When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean.”

I and the other official consumer representatives to the National Association of Insurance Commissioners, who represent millions of consumers nationwide, strongly oppose any attempt to weaken the MLR standard–which most insurers already meet–by taking out agent fees.  Current law ensures that an excessive amount of our premiums (e.g., sometimes as much as 40 percent) is not spent on administrative costs; if it is, consumers are eligible for hundreds of millions, and possibly billions of dollars, in rebates. It puts downward pressure on total premiums.  The MLR provision is already showing results with a slowdown in the rate of growth of premiums.  It contains costs, not by cutting down on the amount of care your policy covers, but by reducing administrative waste.

The current MLR provision is an important consumer protection we cannot afford to lose.

Barb Yondorf
Consumer Liaison Representative to the National Association of Insurance Commissioners

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