The Obama administration did so today through a final rule and interim final rule adopted by the Department of Health and Human Services implementing the MLR provision of the Patient Protection and Affordable Care Act.
It acted even though the NAIC narrowly adopted a resolution via conference call Nov. 22 asking HHS to take “whatever immediate actions are available” to release agents and brokers from medical MLR strictures enacted under the 2010 health care reform act.
See the NAIC's resolution here.
The MLR limits administrative costs as a percentage of healthcare premiums to 15% for large groups and 20% for small group and individual policies.
The MLR rules took effect Jan. 1, but today’s final rule makes modifications and provides certainty to how the MLR is calculated, HHS said.
The modifications are based on public comments solicited in an earlier version of the rule published by Centers for Medicare and Medicaid Services in the spring, HHS said in the final rule.
Robert Miller, president of the National Association of Insurance and Financial Advisors, confirmed the implications of the HHS action in a statement.
“NAIFA is disappointed that the administration rejected the NAIC recommendation to take action that would ensure continued consumer access to professional health insurance agents in its final MLR rule,” Miller said.
He said, however, that NAIFA remains hopeful that Congress will join the NAIC in recognizing the harm caused to consumers and make the necessary changes to the law.”
Miller’s comment referred to two pieces of legislation being considered by the House Energy and Commerce Committee. One is H.R. 1206, which would exclude producer compensation from medical loss ratio calculations. Another is H.R. 2077, which would repeal the MLR entirely.
H.R. 1206, sponsored by Rep. Mike Rogers, R-Mich., and John Barrow, D-Ga., has strong support. The bill has 139 co-sponsors. But it has been mired for months in the House.
“We now call on Congress to heed NAIC’s recommendations and pass H.R. 1206, the bipartisan legislation introduced by Representatives Mike Rogers (R-MI) and John Barrow (D-GA) that would exclude agent and broker compensation from the MLR calculation and provide state insurance regulators with greater flexibility with medical loss ratio (MLR) implementation," said Janet Trautwein, CEo of the National Association of Health Underwriters (NAHU). "We look forward to working with members of Congress on this critical issue."
Tim Dodge, director of research and media relations for the Independent Insurance Agents & Brokers of New York, Inc., said that the trade group was "disappointed that the final MLR rules do not include an exemption for agents' and brokers' commissions."
Dodge said the lack of an exemption has caused insurance companies to reduce the compensation they pay to their agents and brokers. Consequently, Dodge said, insurance producers are finding that it might not make business sense for them to participate in the health insurance market.
He said this "deprives consumers and businesses of the expert advice they need to make informed decisions." He noted the NAIC resolution, adding "We continue to urge Congress and HHS to do just that."
Meanwhile, America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni also released a statement on the final MLR rule.
"HHS has conducted a thorough and balanced process in crafting this final regulation. Today's announcement takes important steps to make the regulation more workable," Ignagni said. "The regulation also ensures that some of the costs associated with modernizing the medical claims coding system are appropriately recognized as activities that improve health care quality. We believe health plans’ programs to prevent and combat health care fraud should be given similar consideration and that additional steps should be taken to ensure that consumers and small employers do not lose access to the guidance of a trusted health benefits advisor between now and 2014. We will continue to work with the Department on these important issues."
Ethan Rome, executive director of Health Care for America Now, openly praised the Obama administration’s decision.
“This is a great victory for consumers because it maintains the integrity of incredibly important consumer protections that hold the insurance industry accountable and because it puts money in the pockets of families who need it a lot more than insurance companies awash in record profits,” Rome said.
The changes to the rule include making the rebate that insurers will have to provide to consumers in 2012 if they don’t comply with the law tax-free.
However, a Government Accountability Office report released earlier this week said that most large and medium-sized insurers appear to be complying with the law, meaning that it is unlikely that insurers will be required to make large payments to consumers next year.
Specifically, the MLR rule will be modified under changes finalized today. “Rather than having insurers send checks that could be taxed, workers in group health plans can receive rebates in a way that is not taxable,” HHS said.
The new regulation also proposes that all consumers receive a notice, showing not just the amount of any rebate, but what the insurer’s MLR means regardless of whether there is a rebate, and how the insurer’s MLR has improved under the new law.
In addition, under the changes, data on the special types of plans, mini-meds and expatriate plans will be publicly posted in the spring, HHS said.
The final rule makes only a minor change to a quality improvement definition to promote insurer improvements in defining or coding of medical conditions for a limited window of time, HHS said.
The changes adopted today also phase down the special circumstances adjustment for mini-med plans.
HHS said that, in 2011, so-called mini-med plans received a special circumstances adjustment to their MLR in the form of a multiplier of 2.0 for 2011.
The final rule phases it down from 1.75 in 2012 to 1.5 in 2013 to 1.25 in 2014. Mini-med plans will be banned by the prohibition on annual limits in the Affordable Care Act starting in 2014.
The final rule, after reviewing data, keeps the expatriate plan multiplier adjustment at 2.0 due to their unique structure. It also levels the playing field between non-profit and for-profit insurers in states with premium taxes.
Also, the final rule does not impact existing waivers to the MLR granted states, according to industry sources.
HHS has granted waiver requests to states like Iowa, where it has allowed MLRs to be 67% and 75% in years 2011 and 2012 respectively, with the final standard of 80% to be implemented in 2013 and beyond. The adjustment was granted in recognition of the inability of some Iowa companies selling individual policies to remain in the market under the initial requirements.