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Consumer Watchdog Cheers Decision to Probe Broker Pay Structure, Acknowledgement that Consumer Protection Needed
Consumer Watchdog, which had sharply criticized the
“Without the united backing of the state insurance commissioners, the legislation’s special-interest authorship is laid bare and its aim—to protect large percentage commissions on health insurance sales—is easier to detect,” said
The brokers’ measure, misleadingly named the “Access to Professional Insurance Advisors Act of 2011,” would change the federal health reform law to let insurance companies exclude broker commissions from their administrative costs when calculating how much they spend on actual health care.
Current law requires insurance companies to pay consumer rebates if they spend less than 80% to 85% of premium dollars on health care.
The legislation, by excluding a chief administrative cost from the administration vs. health care calculation, would effectively take rebate money owed to consumers and pay it to brokers and the insurance companies.
Investment analysts calculate that under the current law, health insurers would pay up to
Costs to taxpayers would also rise, as rising premiums caused more people to lose private insurance. Costs would be higher in the state insurance Exchanges that will offer subsidized coverage as of 2014.
Florida Insurance Commissioner
A substitute measure asks an existing and experienced NAIC task force on health reform to probe brokers’ pay in recent years, the incentives that insurance companies use to gain only the healthiest applicants, possible alternatives to the bill and “any other matter” that comes to its attention. While the brokers are still saying they hope the NAIC will swiftly study the issue and unanimously support their legislation, Consumer Watchdog said the study will show why brokers can’t be satisfied without raising premiums, harming consumers and demolishing the medical care spending rules meant to force the industry to cut costs and operate more efficiently.
“The NAIC task forces did a thorough, open and expert job of developing regulations for the ‘medical loss ratio’ rule,” said Dugan. “We expect the same public access and open debate as they examine broker compensation.”
Key opposition to the special interest legislation included commissioners from populous
Consumer representatives from NAIC itself, as well as Consumer Watchdog, testified against the legislation at the meeting. They provided information about the pay incentives that insurance companies use to influence brokers’ advice to clients.
See Consumer Watchdog testimony at http://www.consumerwatchdog.org/resources/cwnaicstatement.pdf
See Consumer Watchdog’s formal comments in opposition to the legislation at http://www.consumerwatchdog.org/resources/naiccomment3-21-11.pdf
A recent Consumer Watchdog analysis found that a majority of state insurance commissioners either came from the broker or insurance industries, or were elected with substantial industry contributions. Six recent past presidents of the NAIC took jobs in the industry, including two chief lobbyist positions in
Consumer Watchdog is a nonprofit, nonpartisan consumer advocacy organization with offices in
SOURCE Consumer Watchdog