Agents and brokers suffered a loss of $300 million in commissions in 2012 as a direct result of the medical loss ratio provision in the Affordable Care Act, a recent report from the Commonwealth Fund reveals.
The provision—which has been in effect since 2011—requires private insurers to spend at least 80 per cent in the individual market and 85 per cent in the group market of premium dollars on direct medical costs. Those that do not comply with the ratio must issue rebates to consumers.
To meet that requirement, health insurers reduced profits and spending on brokers’ fees, marketing and administrative efforts to the tune of $1.4 billion. Broker expenses, which amount to roughly 3 per cent of premiums, fell by nearly $300 million in individual, small and large group markets.
While Commonwealth Fund President David Blumenthal extoled the medical loss ration requirement as “creating a higher-value insurance product for consumers,” agents and brokers say the impact on their business has been damaging.
“With the medical loss ratio, our commissions were cut almost in half overnight,” Boise, Idaho agency owner Scott Leavitt told Insurance Business. “What you’re seeing is a lot less agents doing a lot more work for half the money they were earning before. We have to pick up more than two clients to make as much money as we were before.
The bottom line is that our job is to help clients and take care of their individual situation, but it’s getting harder. Agents are questioning their sustainability—who is going to be able to survive?”
Commonwealth Fund researchers came up with the figures after reviewing carrier findings with the Centers for Medicare and Medicaid Services. In total, carriers provided $1.5 billion in rebates since the medical loss ratio provision was introduced.
