Brokers Win A Round

Insurance brokers won a round in their battle over the future of sales commissions on Thursday when a key committee of state insurance regulators voted to endorse a controversial bill now before Congress.

The task force of the National Association of Insurance Commissioners said they would endorse the bill — sponsored by Rep. Mike Rogers, R-Mich. — which would remove sales agent fees from administrative costs insurers must report under a provision in the federal health law.

The endorsement still needs approval from the full executive committee of the NAIC, which last year recommended to federal officials that broker fees be included in the calculation of the so-called medical loss ratio. That recommendation was accepted.  To remove broker fees from the calculation would take congressional action.

The Rogers bill would make it easier for insurers to meet the federal requirement that they spend at least 80 percent of revenue on medical care, leaving 20 percent for other costs, such as sales and marketing, profits and executive compensation. Insurers that don’t meet that spending target must issue rebates to consumers.

Without the legislation, agents say their commissions will be cut and many agents could lose their jobs, leaving individuals and small businesses with less help in choosing insurance coverage. They back the legislation and other efforts in state legislatures. Commissions range widely, from 3 percent to 10 percent of premiums, according to the NAIC. Some can earn more in selling policies to individuals.

Consumer groups say such fees are clearly administrative costs and should be included.

“This bill would shift billions that consumers could expect to see in rebates or lower premiums to insurance companies as profits and brokers as compensation,” says Carmen Balber of Consumer Watchdog.

No meeting has yet been scheduled for the full executive committee to take up the endorsement proposals, said NAIC spokeswoman Vanessa Sink.

jappleby@kff.org