Louisiana Rep. Mike Huval has proposed a measure before the House Committee on Insurance which could serve as a stopgap in addressing the market distortions that have arisen from the implementation of the medical loss ratio under the Affordable Care Act (ACA), which is currently in effect.
HB 407 will allow agents who sell health insurance to apply an agency fee to policy transactions.
“Some agents will find coverage for clients almost as a favor, but because that is not their main line of work, they don’t make money off the sale. My bill would enable them to collect an agency fee,” he told local media outlet
The Independent.
While his proposal does not set a cap or a range on the said fee, Huval said that free market forces will dictate what is rational.
“I can tell you that if one agent is charging a much larger fee than others, it’s going to catch up with them in the market. They’re going to lose business,” he explained in
The Independent report.
Allowing health insurers to charge an agency fee could appease an industry wide outcry against the MLR, which limits agency and broker commissions on policies written under the ACA.
The medical loss ratio (MLR) is a provision under the ACA which requires insurers to limit their administrative costs to 15% to 20% of the premiums sold under the health insurance exchanges. Commissions are categorized as administrative costs under the scheme.
Proponents of the provision have touted it as a vehicle to control costs; however, critics say that it has greatly hampered the delivery of health insurance to the general public.
Learn how to grow revenue, reduce costs and improve your customers’ experience. If you’re not currently using e-signature, download this free whitepaper to learn how it can change your business.
“Like many of the law’s diktats, these rules have driven premiums higher and eroded competition and choice in the insurance market.” Forbes contributor Sally Pipes said in a recent opinion piece.
She added that the assumption of the MLR proviso is that the insurance industry is raking in excessive profits from their operations. However, Pipes pointed out that in the year ACA was enacted, the insurance industry clocked in an average 3.3% per annum profit rate.
Furthermore, she explained, “In the end, patients pay for this misguided rule in the form of higher premiums and fewer choices. After all, insurers who aren’t able to meet the 80% threshold solely by trimming administrative costs must either raise premiums or exit the market entirely.”
Related stories:
Start-up broker slapped with $1.2 million fine for unlicensed sales
State lawmakers defend their subsidized insurance
