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Brokers' hopes dashed by feds

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No dice for health insurance brokers. The Obama administration on Friday let stand an earlier rule that said brokers’ fees will have to count toward a 15-percent to 20-percent cap on administrative expenses placed on insurance plans by the 2010 health overhaul.

The ruling is significant because, beginning this year, health insurance plans can spend no more than 20 percent (and 15 percent for large employers) of the premiums they collect from customers on overhead and profit, as opposed to spending on health care and or quality improvement efforts. Any overage must be returned to consumers in the form of premium rebates.

Insurers’ efforts to reach that new goal have led nearly all of them to squeeze commissions to benefits brokers. For example, Indianapolis-based WellPoint Inc. changed its commissions so that they no longer rise from year to year with premium increases, but only if a particular broker actually signs up more people to WellPoint’s health plans.

The change has accelerated consolidation among brokers, particularly those that serve small employers. In Indiana, many brokers have sold their firms to Florida-based Brown & Brown Inc. Its net premiums written have soared from $190 million in 2006 to $915 million last year, according to IBJ research.

Brokers had lobbied extensively to change the rule, arguing that their fees should not be counted as either overhead or medical care in calculating what is called the medical-loss ratio, or MLR. And last month they got a glimmer of hope when the National Association of Insurance Commissioners, in a close vote, passed a resolution urging Congress and the Obama administration to exclude benefits brokers’ commissions from the new MLR rule.

The Obama administration's Department of Health and Human Services classified broker commissions as an administrative expense a year ago, largely following a proposal from the National Association of Insurance Commissioners.

A bipartisan bill pending in Congress, H.R. 1206, would declare broker commissions as neither a medical nor administrative expense. However, the bill is unlikely to pass in the bitterly divided legislative climate.

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  1. These liberals are out of control. They want to drive our economy into the ground and double and triple our electric bills. Sierra Club, stay out of Indy!

  2. These activist liberal judges have gotten out of control. Thankfully we have a sensible supreme court that overturns their absurd rulings!

  3. Maybe they shouldn't be throwing money at the IRL or whatever they call it now. Probably should save that money for actual operations.

  4. For you central Indiana folks that don't know what a good pizza is, Aurelio's will take care of that. There are some good pizza places in central Indiana but nothing like this!!!

  5. I am troubled with this whole string of comments as I am not sure anyone pointed out that many of the "high paying" positions have been eliminated identified by asterisks as of fiscal year 2012. That indicates to me that the hospitals are making responsible yet difficult decisions and eliminating heavy paying positions. To make this more problematic, we have created a society of "entitlement" where individuals believe they should receive free services at no cost to them. I have yet to get a house repair done at no cost nor have I taken my car that is out of warranty for repair for free repair expecting the government to pay for it even though it is the second largest investment one makes in their life besides purchasing a home. Yet, we continue to hear verbal and aggressive abuse from the consumer who expects free services and have to reward them as a result of HCAHPS surveys which we have no influence over as it is 3rd party required by CMS. Peel the onion and get to the root of the problem...you will find that society has created the problem and our current political landscape and not the people who were fortunate to lead healthcare in the right direction before becoming distorted. As a side note, I had a friend sit in an ED in Canada for nearly two days prior to being evaluated and then finally...3 months later got a CT of the head. You pay for what you get...

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