Liberal groups blast proposed insurance broker protections

A group of liberal groups is urging state insurance commissioners to oppose legislation that would reduce how much insurers have to spend on medical care under the healthcare reform law by exempting insurance agents and brokers' fees.

The effort, they write in a letter sent Tuesday to the National Association of Insurance Commissioners, would "undermine the medical loss ratio, raise premiums and deny consumers of anticipated rebates."

Under the law, health plans have to spend at least 80 percent (85 percent in the large group market) of premiums on care on average, or give consumers a rebate starting next year. Agents and brokers want their commissions and other costs to be excluded when calculating that threshold instead of counting as administrative costs, and an NAIC panel has proposed legislation that would make those changes.

Legislation adopted by the NAIC is not binding on federal regulators, but it does carry political weight because insurance is regulated at the state level. That's why more than two dozen unions, consumer groups and liberal associations wrote to the NAIC on Tuesday to oppose the draft legislation.

"Producers' commissions are clearly an administrative cost," the letter states. "This proposed legislation would allow insurers to push these significant administrative expenses off the books, making administrative spending look artificially low in the calculation of the medical loss ratio... Put simply, the (medical loss ratio) will no longer be a useful benchmark for consumers."

The letter comes as Florida has joined Maine, New Hampshire, Nevada and Kentucky in asking for a waiver from the medical loss ratio requirement. 

Maine last week became the first state to be granted its three-year waiver request.

Rep. Mike Rogers (R-Mich.) has said he would soon introduce legislation protecting agents and brokers, and several Democrats have expressed their support.