Insurance brokers' role expected to change with health reform

Physicians who use agents or brokers to buy health insurance for their practices are likely to notice changes when it comes time to renew policies or buy new ones. Among them: Their usual insurance brokers could be unavailable, because they're getting out of the health insurance business.

The changes are a result of provisions in the Patient Protection and Affordable Care Act that require insurers to pay a minimum percentage of premiums on care, a figure known as the medical-loss ratio. The act requires insurers to spend at least 80% of premiums on medical care in the individual and small group market, and 85% in the large group market.

In the interim final rule published by the Dept. of Health and Human Services on Dec. 1, 2010, brokers' fees were not included in the percentage spent on care, a rule that followed the recommendations of the National Assn. of Insurance Commissioners regarding medical-loss ratio calculations.

It's possible that the NAIC could change its recommendation, Congress could pass legislation changing the law, or HHS could amend its policy before insurers have to calculate any owed rebates in the first part of 2012, but insurers already are assuming that the rule will remain as is.

Some insurers have reduced or eliminated commissions for agents selling policies to employers. Recently, UnitedHealthcare announced that it would not pay commissions to agents in Texas or Florida for policies sold to large employers. (See correction)

An Aug. 29 report from the Government Accountability Office that examined insurers' early reactions to the medical-loss ratio rule said, "Most of the insurers GAO interviewed were reducing brokers' commissions and making adjustments to premiums," and that "almost all of the insurers said they had decreased or planned to decrease commissions to brokers in an effort to increase their MLRs."

"We're an expense to them, and they're trying to reduce expenses," said Marc Jessup, an independent insurance agent based in New Bern, N.C., who specializes in selling employee benefits to medical practices.

For physicians such as Stephen Rockower, MD, an orthopedic surgeon in Rockville, Md., an agent is helpful. Though Maryland has a law that requires standard benefits at a standard price for small businesses, Dr. Rockower said, there are enough variables in coverage to make selecting and handling health benefits too much for the practice to handle.

"To do all those comparisons, it would take a lot of extra work," he said. "Our office manager maybe could do it, but she doesn't need another thing to do."

Many in the insurance industry believe that agents and brokers will be in demand more than ever in the next few years in helping individuals and businesses deal with the changes brought about by health system reform. For some agents, that will mean more work for less pay, they said.

Health insurance trade group America's Health Insurance Plans supported excluding brokers' fees from the medical-loss ratio calculation so they would not be counted as part of the insurers' overhead. AHIP spokesman Robert Zirkelbach said the threat to brokers' payments was a "negative effect" of the medical loss-ratio minimums.

"Individuals and small businesses are losing access to the benefits of a trusted health benefits adviser, which is particularly important between now and 2014, where there aren't new exchanges up and running," he said.

Jessup said that, like physicians, brokers are dealing with a lot of uncertainty in the lead-up to the major reform provisions taking effect in 2014. As is true in medicine, he added, some agents probably will prefer to retire rather than deal with the changes: "What we share with physicians is the fear of the unknown."