Obama's health-care law is hurting insurance agents and millions of consumers

This month marks a year since Obama's health law put into play one of its lesser known, but most damaging provisions. A rule that amounts to a pay cut for insurance agencies has complicated the lives of millions, reducing the help with claims that these agents provide.

AP Photo/J. Scott Applewhite
Sen. Jim DeMint, (R) of South Carolina joins other conservative lawmakers in October 2011 to criticize President Obama's national health care plan, often called "Obamacare." The event was organized by Repeal It Now.org campaign.

The national health-care reform law‘s unintended consequences have been well catalogued. This month marks a year since President Obama’s Affordable Care Act, sometimes called Obamacare, put into play one of its lesser known, but most damaging provisions.

If you’ve never heard of the law’s medical loss ratio (MLR) provision, you’re certainly not alone. This simple calculation has had the effect of radically reducing what health insurance agents earn. That, in turn as greatly restricted their ability to help million of Americans navigate the maze of approvals needed for medical procedures and processing claims. It has also had a devastating effect on these agents’ businesses and is disrupting the insurance market.

At the end of last year, state insurance commissioners took a big step to undo some of the damage done by the Patient Protection and Affordable Care Act. The National Association of Insurance Commissioners approved a resolution urging Congress to remove health insurance agents’ compensation from the law’s medical loss ratio provision. In the meantime, the association wants the Obama administration to what it can to mitigate the negative impact of the provision.

So what does that mean? 

The MLR provision states that insurers must dedicate at least 80 percent of individual and small group premiums they receive to medical- or quality-improvement expenses. The figure goes up to 85 percent for large group policies. Because agents’ compensation counts against the MLR (along with such items as marketing expenses and corporate profits), many insurance companies immediately slashed commissions when the provision went into effect last January.

Insurers having to put such a high portion of the premiums collected toward these expenses meant that agents – on the frontlines of helping customers – made less and had to cut services to compensate.

A November survey by the National Association of Insurance and Financial Advisors found that 80 percent of health insurance agents saw their commissions decrease, including 52 percent whose companies cut commissions by 25 percent or more, since the health-care law went into effect last January. A report by the Government Accountability Office confirmed this, stating that “almost all of the insurers said they had decreased or planned to decrease commissions to brokers in an effort to increase their MLRs.”

If it sounds like it’s a tough time to be an insurance agent, it is. Their median annual income was less than $50,000 before the law went into effect. Many are small business owners who can no longer afford to pay their employees.

But the problem is much more serious than that. It’s getting tougher to be a consumer in the market for health insurance, too. Unlike agent compensation, premiums have not gone down. And while removing compensation from the MLR would not cause premiums to increase, there have been a slew of unintended consequences from leaving it in.

Agents do much more than sell insurance. They serve their clients, not the insurance companies, helping people when they have trouble getting surgical procedures and tests approved or claims processed. They provide corporate clients with individual enrollment assistance for their employees. They create and administer company wellness programs and often serve as the extended human resources departments for small business clients.

As agents deal with the consequences of the MLR, many are finding that the cost of servicing clients now exceeds their income. They are cutting back on services to customers and laying off support staff. Some are leaving the health insurance business altogether, effectively reducing the competition that the health-care law was supposed to foster. All of this is disrupting the marketplace.

That’s why I applaud the efforts of the National Association of Insurance Commissioners. The commissioners are well respected and have a long history of protecting consumers and ensuring the stability of the insurance market. Their opinion rightfully carries weight among decisionmakers in Washington.

Congress and the president certainly never intended for the law to limit consumers’ health-care choices or reduce the quality of their coverage. As President Obama has acknowledged, “Anything can be improved.” Treating agents’ compensation as a pass-through item and thereby removing it from the MLR equation would be a huge improvement and a first step toward ensuring that Americans continue to have access to the essential support and customer service that professionally trained and licensed agents provide. 

Robert Miller is president of the National Association of Insurance and Financial Advisors, based in Falls Church, Va. NAIFA comprises more than 600 state and local associations representing the interests of 200,000 members and their associates nationwide.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Obama's health-care law is hurting insurance agents and millions of consumers
Read this article in
QR Code to Subscription page
Start your subscription today