Representative Leonard Lance (R-NJ) pledged his support of a bill that promises to save thousands of jobs and make it easier for Americans to secure high-quality, affordable health insurance coverage.
With the support of lawmakers like our congressman, the Access to Professional Health Insurance Advisors Act of 2015 (H.R. 815) would modify the way that the federal health reform law calculates health insurers' administrative costs by excluding agents' commissions.
Such a change may seem esoteric, but without it, hundreds of insurance agents would be put out of work – and everyone in our community would find it more difficult to obtain the right coverage that meets their family needs.
The federal health reform law dictates that insurers devote at least 80 percent of premium dollars to medical claims in the individual and small-group markets -- and 85 percent in the large-group market. Firms that don't reach these "medical-loss ratio" (MLR) thresholds must rebate consumers the difference.
The idea is to limit potentially wasteful spending on overhead and ensure that consumers get good value for their premium dollars. Unfortunately, agents and brokers are becoming collateral damage in the federal government's attempt to mitigate insurers' administrative costs.
Insurance companies set commissions, they do not pay them. Agents are licensed and independent, working for the client during initial sale, renewal and providing year-round advice and assistance, whether it is an employer or an individual. Insurance carriers simply serve as pass-through conduits for commission fees.
The misclassification of commissions has had a swift – and disastrous – consequence. Many insurers immediately slashed spending on commissions when the MLR rules took effect last year. The U.S. Government Accountability Office found that agent commissions have fallen by as much as 50 percent since the passage of the federal health reform law.
The MLR has made it impossible for agents to stay in business. Consequently, the exodus is already beginning.
A recent study by the federal Bureau of Labor Statistics found that the number of health insurance agents and brokers decreased by 3.3 percent nationally within the first few months of the enactment of the new MLR rules.
That's bad news not just for the employment situation – but for families and small businesses, as well. People depend on agents to help them navigate the insurance marketplace. As the provisions of health reform take root, it will only grow more confusing. Small employers depend on their agent to assist them with all related benefit problems and functions year round.
By supporting H.R. 815, Congressman Lance showed he understands the skills and knowledge agents possess are more essential to our community than ever. Excluding commissions from the medical loss ratio will ensure that agents continue providing the stellar service on which families and small business rely.
Steve Hund is a member of the North chapter of the New Jersey Association of Health Underwriters and serves as a member of the Clark Township Council
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