Insurance agents fight for survival in world after health reform

Insurance agents and brokers, afraid of being rendered irrelevant in the post-health reform world of simplified insurance shopping, are fighting for their very survival.

The agents want lawmakers' and regulators' support in getting the Obama administration to recognize their role in the federal insurance Web portal, which lets consumers compare coverage options online.

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They've also been making their case to the National Association of Insurance Commissioners (NAIC), which is tasked with ironing out the details of many of the insurance market reforms required by the healthcare law.

"This issue is important for insurance regulators because we know that [agents and brokers] provide a valuable service," said Illinois Insurance Director Michael McRaith, a prime sponsor of a resolution "to protect the ability of licensed insurance professionals to continue to serve the public."

The resolution was approved overwhelmingly Tuesday — with one abstention — by the NAIC at its annual meeting in Seattle. It had 25 sponsors.

An early draft of the resolution, obtained by Politico, addressed specific issues the agents and brokers hope to see resolved in their favor.

It called, for example, for "federal policymakers to review the definition of the Medical Loss Ratio to enable agents to continue to provide these services.” Agents have asked for regulators to ignore their commissions when calculating the ratio — the percentage of premiums that must go to medical spending rather than administrative costs — mandated by the healthcare reform law, arguing that failing to do so could put them out of business.

Agent commissions are considered administrative costs. But now that the new law mandates that health plans spend no more than 20 percent of premiums on such costs, agents say the commissions should be left out of the calculation.

"There are ways to deal with commissions that won't affect the medical-loss ratio," said John Greene, vice-president of the National Association of Health Underwriters (NAHU), which represents agents and brokers. "So it's a question now for [state regulators] to decide whether that makes sense or not."

The draft resolution also identified a very limited role for the "Exchange Navigators" created by the law. Their role would largely be to reach out to low-income people who have traditionally not had health insurance to inform them of their options.

The draft said federal regulators should establish standards so the navigators are “appropriately limited to directing consumers to government agencies and licensed insurance professionals who can provide the specialized services they need.”

The final version of the resolution was considerably less detailed. It was silent on the medical loss ratio and simply called for the duties of the navigators to "appropriately reflect the important role of insurance producers who are skilled, knowledgeable, educated and licensed and registered."

McRaith said the changes to the draft did not indicate dissension within the NAIC.

The goal of the resolution "was to acknowledge the breadth of the question," he said. "And [the concern] was that including something as specific as the loss ratio reference would unnecessarily limit the breadth of the question."

But Tim Jost, the NAIC consumer representative, told The Hill there were issues with the initial draft, which was not meant to become public.

For one, the role of the Exchange Navigators is spelled out in the health reform law, and state regulators wanted to avoid "confrontation" with the federal statute.

As for the medical-loss ratio, details are still being worked out by the state regulators. A final decision — including how to handle agent and broker fees — is expected later this summer.

"That's going through the process," Jost said. "There was a concern there about not prejudging the process under way at the NAIC."

Liberal activists, meanwhile, argue protecting agents and brokers' bottom line makes no sense because the healthcare reform law greatly simplifies the insurance market.

"We think that rather than building in more layers and fees between consumers and their doctor, that we should look for ways to simplify the purchase of insurance so that individuals, families and small businesses don't need to rely on the help of this industry of middle-men," said Avram Goldstein, communications and research director for Health Care for America Now.

The adopted resolution does call for "a transitional approach" concerning the treatment of agents and brokers between now and 2014, when the exchanges are in place and consumers will have access to simplified one-stop shopping in their state.

But Goldstein argued against a phase-in that would exclude the agent commissions from the medical-loss ratio and other provisions of the law.

"The great minds on the financial side of the health insurance industry could figure out ways to work with NAHU and others to move toward a time when the changes are on the scene," he said. "But there's no reason to exclude them for three years until that moment comes. They should start changing the way they spend their money now."