Despite claims by health insurers that the Patient Protection and Affordable Care Act’s medical loss ratio requirements are forcing them to pay lower commissions to agents and brokers, Illinois Insurance Director Michael McRaith in speaking with BestWire said it's the insurers themselves who should ante up to ensure broker commissions aren’t affected by the sweeping changes facing the health insurance industry.
McRaith, who was recently tapped to become the first head of the Federal Insurance Office, said in Illinois, five of the largest health insurers in the state have taken in billions in surplus revenues even as they tell agents and brokers that they are going to have to make cuts to their commissions. The state’s largest insurance company has $8 billion in surplus capital and that together, the top five health insurers in the state have $28 billion in surplus capital, he said.
“That tells us that the insurers are squeezing the agents and brokers, squeezing consumers, and squeezing providers. Everybody is getting less from the insurers than the insurers themselves,” McRaith said. “My view is that the best solution is to require the health insurers to pay a certain percentage of their surplus to the agents and brokers to ensure that the important role of agents and brokers is preserved in the transaction.”
McRaith said he was skeptical of the need for legislation such as the bill introduced last month by U.S. Rep Mike Rogers, R-Mich., and U.S Rep. John Barrow, D-Ga, which would exempt broker commissions from the MLR transaction. “We don’t need a law, we don’t need an amendment to the Affordable Care Act, we really don’t need regulatory action and to further burden consumers with higher, increased premiums just to pay agents and brokers,” McRaith said. “The insurance companies can already afford to make those payments. They have chosen not to.”
McRaith, who also serves as secretary/treasurer of the National Association of Insurance Commissioners, said he was also skeptical of the NAIC’s need to endorse the Rogers-Barrow bill without a clear indication that MLRs were actually responsible for declining broker commissions. The NAIC currently has a task force investigating the MLR issue.
McRaith said he thinks the best way to ensure that brokers, many of whom have argued they may have to find a new career if their commissions continue to decline, remain a part of the equation is to have insurers cover the cost of their commissions.
“The health insurance companies have created the problem. The health insurance companies should solve the problem,” McRaith said. “I don’t believe the regulatory community or Congress should be called upon and to salvage further billions in surplus at further expense to the consumers.”
McRaith’s comments contrast sharply with remarks made by U.S. Sen. Mary Landrieu, D-La., during the Independent Insurance Agents & Brokers of America’s conference in Washington on April 14.
Landrieu, who pledged to work with the agent and broker community to “fix” the problems with the MLR requirement said it was “never our intention” to have commissions affected by the passage of the Affordable Care Act. Landrieu said she had heard from several agents and brokers who said that their reduced commissions were having a significant impact on their businesses.
“That was not our intention, and I will work with you to fix that,” Landrieu said. “We fought to keep the insurance industry as part of the mix because it brings value to the system. But we want the insurance industry to be responsible.”