Insurance Regulators Balk At Supporting Bill That Consumer Advocates Say Will Increase Health Insurance Premiums

March 29–A national consumer group says a bill before Congress would increase the price of health insurance by allowing insurers to exclude broker commissions when calculating what portion of premiums is spent on patient medical expenses compared with administrative costs.

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The nonprofit Consumer Watchdog of California and Washington, D.C., praised a task force at the National Association of Insurance Commissioners for holding off on supporting the bill — at least for now — during a meeting Sunday in Austin, Texas.

Connecticut was praised by the consumer group as one of the states opposing the legislation, according to Consumer Watchdog. Insurance Commissioner Thomas Leonardi is not on the task force that considered the bill, but he attended the task force meeting and voiced his concerns about taking a vote before the issue is fully researched.

“We must have a very clear understanding of how the resolution would affect the consumer before we can move forward,” Leonardi said.

The bill before Congress is called the Access to Professional Insurance Advisors Act of 2011. A task force for the insurance-commissioners’ group was planning to vote on a resolution supporting the bill. Instead, the group will research the issue for six weeks before taking a stand.

At stake is the price of health insurance. Federal health care reform signed last year by President Barack Obama requires health insurers to spend a minimum amount of every dollar earned in premiums on patients’ medical expenses. Insurers must spend of 80 cents on the dollar for individual and small-group plans, 85 cents for large-group plans. The amount spent on medical expenses is known in the industry as medical-loss ratio, or MLR.

Starting this year, if health insurers spend less than those minimums, they are required to pay consumers a rebate at the end of the year. Regulators must determine what is considered a medical expense and what is considered the insurer’s administrative cost.

If fewer expenses are considered administrative costs, or if more expenses are included as medical expenses, health insurers will have an easier time meeting the federal standard set in the health reform laws passed last year.

“To date, I have not seen any hard data that shows whether the MLR is the reason the broker commissions have decreased,” Leonardi said. “I do appreciate the value of brokers in the system and fully understand their concerns, but to rush this issue to a vote this weekend would be imprudent and would abandon the NAIC’s traditionally deliberate and fact-based approach.”

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