As required by The Patient Protection and Affordable Care Act (PPACA), CMS issued on December 7, 2011, its Final Rule for medical-loss ratio requirements. Under PPACA, health insurance companies must spend a minimum percentage of premiums on healthcare; this requirement is better known as the medical-loss ratio. Specifically, PPACA requires that insurers in the individual and small group market spend at least 80% of premiums on medical care, and in large group markets, the requirement goes up to 85 percent.
CMS' "Interim Final Rule" from December, 2010, which was based upon recommendations from the National Association of Insurance Commissioners, did not permit the fees and commissions paid by health insurers to insurance brokers to be included in the percentage spent on medical care. However, insurance brokers had hoped that in its Final Rule, CMS would address the issue, especially in light of UnitedHealthcare's announcement that it would no longer pay commissions to brokers for policies sold to large employers in Texas and Florida.
Much to the dismay of insurance brokers, their concerns were not addressed in the Final Rule. In fact, the Final Rule does not address the subject at all.
In response to the Final Rule, the National Association of Health Underwriters and the National Association of Insurance and Financial Advisors have called upon Congress to pass corrective legislation in the form introduced in March 2011 in the United States House by Representatives Mike Rogers (R-Mich) and John Barrow (D-Ga) with 149 co-sponsors. The Access to Professional Health Insurance Advisors Act would exclude agent and brokerage fees from the medical-loss ratio calculation. Nevertheless, no action has been taken on this proposal after its referral to the House Subcommittee on Health shortly after its introduction.
Now that the Final Rule has failed to address the concerns of insurance brokers, it will be interesting to see if Congress moves forward with the proposed legislation or if other insurance companies follow the lead of UnitedHealthcare and stop payment of commissions to brokers. To further complicate matters, since 2012 is an election year and the US Supreme Court is scheduled to hear three days of oral argument regarding the constitutionality of PPACA in March, Congress may be reluctant to act in the near future. As a result, insurance brokers may continue to be left out in the cold until after the Supreme Court issues its decision in the judicial attack on PPACA or a new Congress and/or a new President address this issue in 2013.
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