IBJNews

Brokers' hopes dashed by feds

Back to TopCommentsE-mailPrintBookmark and Share

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.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
ADVERTISEMENT