HHS Unveils Insurance Rule: Brokers Do Not Count As 'Health Costs'

The Department of Health and Human Services released its final medical loss ratio rule. The rule will ensure that health insurance companies spend at least 80 percent of consumers' health insurance premiums on medical care rather than on income, overhead and marketing expenses.

The Hill: "Insurance plans will soon have to give consumers more information about how their premium dollars are spent, even if the spending meets new federal requirements. The disclosure requirements were included in final regulations on the healthcare reform law's medical loss ratio (MLR) provision. The Health and Human Services Department finalized its MLR rules Friday" (Baker, 12/2).

Kaiser Health News: The rule "rebuffs a plea from insurance agents that fees paid to brokers and agents be excluded from the administrative cost limits imposed under the 2010 federal health law. ... Brokers had lobbied hard to have their fees exempted from the calculation of administrative costs. ... But consumer advocates fought the move, saying commissions are clearly administrative costs and removing them would make it easier for insurers to avoid paying the required rebates to consumers. ... The Department of Health and Human Services did agree to phase out rather than abruptly halt special allowances for the administrative expenses of so-called 'mini-med' plans that offer limited benefits to individuals or small groups" (Appleby, 12/2).

USA Today: "The claim that agents are losing money may not be entirely supported, [Kansas Insurance Commissioner Sandy] Praeger said. A Government Accountability Office report released in July found that 'almost all' insurers had lowered or planned to lower their commissions to brokers to maintain a high medical loss ratio. That's misleading, Praeger said, because insurers have lowered the percentage of an agent's rate — or moved toward a flat fee — as health care costs have risen" (Kennedy, 11/2).

Bloomberg: "Consumers won’t have to pay taxes on rebates they get from health insurance plans that violate spending rules in President Barack Obama's 2010 overhaul, the U.S. said" (Wayne, 12/2).

Politico Pro: "The HHS rule comes less than two weeks after the National Association of Insurance Commissioners, following a controversial vote that split the group, urged Congress and HHS to provide relief to agents and brokers, who say the MLR requirement is forcing cutbacks in their industry. ... Expatriate policies sold to employees working outside the United States, however, are getting indefinite relief from the MLR rule. ... The final rule also includes a couple of major consumer-friendly provisions. Any rebates paid to consumers for failure to meet the MLR benchmarks will be tax-free" (Millman, 12/2).

Modern Healthcare: "Insurance companies that do not meet this standard must provide the difference in rebates to their customers, beginning next year. The final rules implementing the MLR requirements rejected insurer requests that the health expenditures side of the equation include both antifraud efforts and costs associated with implementing ICD-10 codes" (Daly, 12/2).

You can read the full MLR final rule and a related interim rule or read the HHS fact sheet.

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