Insurance brokers have been rallying behind a controversial bill before Congress. The bill was first introduced last month by Senator Mike Rogers of Michigan. The legislation seeks to remove the sales agent fees from insurers’ administrative costs. Supporters of the bill assert that it will help protect the jobs of agents. Furthermore, by reducing costs, insurers will be able to transfer the savings down to consumers. For insurers, the bill holds such promise that they were hoping that federal insurance regulators would endorse it. Regulators, however, have a much different idea as to what should be done.
The National Association of Insurance Commissioners had originally supported the bill. During a recent conference amongst executives, the decision was made to discontinue that support. While the organization continues to support the underlying purposes of the bill, it is not prepared to commit its full support to the bill at this time.
The overall goal of the legislation is to make it easier for insurers to meet new federal requirements laid down by the Affordable Care Act. The law dictates that insurers must spend at least 80% of the money they collect from premiums on medical care. Any shortfalls in this target are known as the “medical loss ratio,” which must be repaid to policyholders. The Department of Health and Human Services estimates that such shortfalls could mean that more than 9 million policyholders will be eligible for refunds totaling $1.4 billion by 2012.
The bill seeks to provide some leniency on this provision of the health care reform, but removing broker fees from the formula.