New Report: Brokers Bill Could Cut Consumer Healthcare Rebates by Two-Thirds
Consumers Union examines H.R. 1206 as House Committee Prepares for Markup
WASHINGTON, DC – Legislation being considered in the House of Representatives could have cut consumer healthcare rebates from $1.1 billion to as little as $378.8 million, according to a new report from Consumers Union, the policy and advocacy division of Consumer Reports. The report on H.R. 1206 — the Access to Professional Health Insurance Advisors Act — comes as the House Energy and Commerce Committee prepares for a Thursday markup on the bill that aims to eliminate insurance agent and broker fees from the Medical Loss Ratio equation that requires insurance companies spend at least 80 percent of premiums on actual medical care or rebate consumers the difference.
“For the first time, insurers were finally held accountable for how they spend consumers’ premium dollars. $1.1 billion that should have gone towards medical care – and not administrative fees or CEO salaries – was rightfully returned consumers,” said DeAnn Friedholm, Director of Health Reform for Consumers Union. “But if this legislation had been in effect, consumers and businesses could have lost out on as much as $722.6 million in rebates, nearly two-thirds of the rebates paid. Businesses and families that received refund checks this summer should be worried by this legislation.”
The findings are based on estimates of the impact of changing the medical loss ratio calculation provided by the National Association of Insurance Commissioners (NAIC) in 2011. Their estimates used data provided by insurers through the 2010 Supplemental Healthcare Exhibits (SHCE). Consumers Union applied those estimates to final rebate amounts reported in 2012. Overall, the analysis found that individuals and businesses would have seen a reduction of approximately two-thirds of rebates if insurance producer (brokers and agents) compensation were excluded from the equation.
Consumers Union is also sending a letter to the House Energy and Commerce Committee highlighting the findings and urging Members to oppose the legislation. The letter points out that while brokers have an important role to play in the health insurance market, broker’s fees and commissions are inherently an administrative, not medical, cost. And as commissions can eat up 10 percent or more of premiums, removing them from the calculation would exempt a large administrative cost from the MLR calculation. This would effectively gut the rule’s effectiveness at lowering costs and improving value for consumers.
Friedholm said, “We recognize that brokers have a role to play, particularly in the small group market, but the first concern must be the impact on consumers. And overwhelmingly, the evidence shows that MLR is working for consumers and should not be weakened by this legislation.”