State Insurance Commissioners Consider Amendment to and Waiver from Obamacare's Medical Loss Ratio

Yesterday, a task force of the National Association of Insurance Commissioners met via conference call to report on the progress they have made towards solving the problem Obamacare has created for health insurance agents.

Under Obamacare's Medical Loss Ratio (MLR), insurance companies must spend a minimum of 80-85% of every premium dollar on health care benefits. Any difference will have to be refunded to consumers under the plan.

The problem for health insurance agents is that their commissions are not excluded from the calculation. This means insurance companies must include it in the 15-20% overhead allowed by the regulation. But in an industry where At stake is the survival of the health insurance agent profession.

In yesterday's conference call task force chair and Florida State Insurance Commissioner, Kevin McCarty, reported that the task force was exploring three options:

1. Developing language to amend Obamacare
2. Petitioning the Department of Health and Human Services for a special waiver for insurance agent commissions.
3. Recommending that states consider changing their definitions of "premium" and "commission" so as to mitigate the effects of the MLR regulation.

The state insurance commissioners on the conference call seemed to understand both the important essential role agents have in educating consumers in the health insurance market, as well as the danger the MLR regulation poses to the agent profession and the consumers that depend on them.

"Consumer representatives," on the other hand, were outraged. One consumer representative, Timothy Jost, spoke up even before the floor was opened up for comments. Jost said he was "incredulous" at what he was hearing. He said that what the state insurance commissioners were proposing would effectively be a rate hike for consumers.

When one consumer advocate asked why the commissioners were pursuing a change, McCarty, replied that squeezing agents out of the market is not a solution for rising costs.

Overall, the consumer representatives seemed to fail to recognize even the most basic principles of economics. Regulations that force insurance agents out of the market by mandating how much profit can be made are contrary to our free market system. Such regulations inhibit competition and market creativity and thus harm consumers by reducing their options.