NAIFA President Terry K. Headley testified Sunday at the NAIC’s 2011 Spring National Meeting in Austin on how unintended consequences of the 2010 health care law are harming insurance advisors and consumers.
Headley spoke on behalf of the agent and broker community and told the NAIC Professional Health Insurance Advisors Task Force that the Patient Protection and Affordable Care Act’s medical loss ratio (MLR) provision, in particular, is having “disastrous effects” on the customer service provided by licensed insurance agents.
The MLR calculation is supposed to ensure that health insurers spend 80-85 percent (depending on the size of the health plan) of the premiums they receive on medical expenses and quality-improvement efforts. Currently, agent compensation is counted on the administrative side of the MLR equation, even though agents do much more than sell and administer policies. As companies have scrambled to meet the MLR requirement, many agents have seen their compensation slashed by up to 50 percent, Headley testified.
Services provided by agents continue long after a policy is in force, Headley said. The agents are trained to help their clients with ongoing evaluations of their health care needs and coverage options, and they help clients file claims and provide assistance if problems with care providers or the insurance companies arise. In addition, many agents design and administer employee wellness plans for their group health clients, and they often serve as a de facto extension of their small business clients’ human resources departments.
Agents provide all of these services at no additional cost to their clients. As the MLR calculation has dried up agent commissions, many agents have been forced to abandon their customer service roles. Others have left the health insurance market altogether, leaving middle-income and small business clients to fend for themselves.
Headley emphasized to the NAIC task force that preserving the role of the agent in the health care system is crucial to ensuring the wellbeing of consumers and their employers. He asked the NAIC to support federal legislation to preserve consumer access to professional assistance in the health insurance market by removing agent compensation from the MLR equation.