NARAB II Bill Introduced in Congress
By: Margarita Tapia
The Big “I” has long advocated for targeted federal legislation to modernize the state system of insurance regulation, including the area of agent licensing, and praised the recent introduction of H.R. 1112, the “National Association of Registered Agents and Brokers Reform Act” (NARAB II), in the U.S. House of Representatives. Lead sponsors Reps. Randy Neugebauer (R-Texas) and David Scott (D-Ga.) were joined by 46 other bipartisan original co-sponsors in introducing the bill.
The Big “I” has long supported state regulation of insurance and believes that the recent economic crisis demonstrated that the state system has clearly met the two primary goals of regulation: consumer protection and financial oversight. However, while the state system has excelled in these two critical areas, it is equally clear that it is in need of enhancements to streamline and modernize the system, especially in the agent licensing process.
NARAB II would provide non-resident licensing reform while preserving the rights of states to supervise and discipline agents and brokers. The legislation would apply to marketplace entry only and would not affect day-to-day state insurance regulation; agents and brokers would have to adhere to each state’s laws once they begin operating in that state.
The average independent agency is authorized to operate in at least eight states, and even small and medium-sized agencies are often licensed in 35–50 jurisdictions. Insurance producers are operating and obtaining licenses in more jurisdictions than ever, and the current system places costly administrative burdens on independent agents that are ultimately detrimental to consumers.
NARAB II would immediately establish NARAB as a private, nonprofit entity managed by a board composed of state insurance regulators and marketplace representatives. NARAB would not be part of or report to any federal agency and would not have any federal regulatory power. Nothing in the bill would preclude producers from continuing to be licensed in the traditional manner. However, agents who are licensed and in good standing in their home state and who satisfy NARAB membership criteria could apply for NARAB membership. NARAB II would effectively create a one-stop producer licensing for additional licenses beyond the home state for producers operating in multiple states and for those who would like to expand their operations.
The Big “I” strongly supports this common-sense reform of agent licensing to reduce the administrative burdens faced by our small business members.
The NARAB II legislation passed the House by voice vote in both the 110th and 111th Congress. The Big “I” is encouraged by the tremendous bipartisan support of the bill again by this Congress and looks forward to working with both the House and the Senate on advancing this needed legislation.
Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.
Bipartisan Medical Loss Ratios (MLRs) Bill in the Hopper
Last month, Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) introduced H.R.1206, the “Access to Professional Health Insurance Advisors Act of 2011,’’ which would specifically exclude agent compensation from the Medical Loss Ratios (MLRs) formulas enacted as part of the Patient Protection and Affordable Care Act (PPACA).
The 2010 health care reform law establishes MLRs for insurance carriers, which mandate that at least 80% (individual and small group) or 85% (large group) of premiums collected must go toward “health care quality improvement.”
In other words, a carrier’s “non-claims costs”—such as executive salaries, advertising and administrative costs—cannot exceed 15% of premium revenue in the large group market or 20% in the small group and individual markets. If the thresholds are breached, rebates must be sent to consumers at the end of the year beginning in 2012.
Unfortunately, through the regulatory process, HHS included agent compensation in the MLR calculation as an administrative cost. The regulations were released by the administration in December of 2010 and went into effect on Jan. 1, 2011. These rules have had a detrimental effect on the private insurance market, creating a tremendous squeeze on agent compensation.
The Big “I” continues to press Congress and the Obama administration that agent compensation is collected from the consumer and passed-through to agents as a convenience. This compensation is not insurance company revenue and, therefore, should not be part of the MLR formula.
The Big “I” believes that ultimately the MLR regulations will push many small insurers out of business and decrease competition in the marketplace, leading to less consumer choice. The ratios also fail to take into account the role that agents play in the health care marketplace after the sale of the policy, such as guiding consumers through the claims process and preventing fraud. These ratios also have the potential to create a perverse incentive for insurers to raise rates, since raising premium levels makes it easier to achieve the requisite ratio.
The IIABA government affairs team has been educating congressional leaders and rank and file members of Congress on the urgency of this issue for months, culminating with the filing of the bipartisan Rogers-Barrow legislation in March. The Big “I” will continue to push for its advancement through the legislative process. However, this is sure to be an uphill climb since the political dynamics involving the PPACA are treacherous.
—M.T.
The Big “I” has long supported state regulation of insurance and believes that the recent economic crisis demonstrated that the state system has clearly met the two primary goals of regulation: consumer protection and financial oversight. However, while the state system has excelled in these two critical areas, it is equally clear that it is in need of enhancements to streamline and modernize the system, especially in the agent licensing process.
NARAB II would provide non-resident licensing reform while preserving the rights of states to supervise and discipline agents and brokers. The legislation would apply to marketplace entry only and would not affect day-to-day state insurance regulation; agents and brokers would have to adhere to each state’s laws once they begin operating in that state.
The average independent agency is authorized to operate in at least eight states, and even small and medium-sized agencies are often licensed in 35–50 jurisdictions. Insurance producers are operating and obtaining licenses in more jurisdictions than ever, and the current system places costly administrative burdens on independent agents that are ultimately detrimental to consumers.
NARAB II would immediately establish NARAB as a private, nonprofit entity managed by a board composed of state insurance regulators and marketplace representatives. NARAB would not be part of or report to any federal agency and would not have any federal regulatory power. Nothing in the bill would preclude producers from continuing to be licensed in the traditional manner. However, agents who are licensed and in good standing in their home state and who satisfy NARAB membership criteria could apply for NARAB membership. NARAB II would effectively create a one-stop producer licensing for additional licenses beyond the home state for producers operating in multiple states and for those who would like to expand their operations.
The Big “I” strongly supports this common-sense reform of agent licensing to reduce the administrative burdens faced by our small business members.
The NARAB II legislation passed the House by voice vote in both the 110th and 111th Congress. The Big “I” is encouraged by the tremendous bipartisan support of the bill again by this Congress and looks forward to working with both the House and the Senate on advancing this needed legislation.
Margarita Tapia (margarita.tapia@iiaba.net) is Big “I” director of public affairs.
Bipartisan Medical Loss Ratios (MLRs) Bill in the Hopper
Last month, Reps. Mike Rogers (R-Mich.) and John Barrow (D-Ga.) introduced H.R.1206, the “Access to Professional Health Insurance Advisors Act of 2011,’’ which would specifically exclude agent compensation from the Medical Loss Ratios (MLRs) formulas enacted as part of the Patient Protection and Affordable Care Act (PPACA).
The 2010 health care reform law establishes MLRs for insurance carriers, which mandate that at least 80% (individual and small group) or 85% (large group) of premiums collected must go toward “health care quality improvement.”
In other words, a carrier’s “non-claims costs”—such as executive salaries, advertising and administrative costs—cannot exceed 15% of premium revenue in the large group market or 20% in the small group and individual markets. If the thresholds are breached, rebates must be sent to consumers at the end of the year beginning in 2012.
Unfortunately, through the regulatory process, HHS included agent compensation in the MLR calculation as an administrative cost. The regulations were released by the administration in December of 2010 and went into effect on Jan. 1, 2011. These rules have had a detrimental effect on the private insurance market, creating a tremendous squeeze on agent compensation.
The Big “I” continues to press Congress and the Obama administration that agent compensation is collected from the consumer and passed-through to agents as a convenience. This compensation is not insurance company revenue and, therefore, should not be part of the MLR formula.
The Big “I” believes that ultimately the MLR regulations will push many small insurers out of business and decrease competition in the marketplace, leading to less consumer choice. The ratios also fail to take into account the role that agents play in the health care marketplace after the sale of the policy, such as guiding consumers through the claims process and preventing fraud. These ratios also have the potential to create a perverse incentive for insurers to raise rates, since raising premium levels makes it easier to achieve the requisite ratio.
The IIABA government affairs team has been educating congressional leaders and rank and file members of Congress on the urgency of this issue for months, culminating with the filing of the bipartisan Rogers-Barrow legislation in March. The Big “I” will continue to push for its advancement through the legislative process. However, this is sure to be an uphill climb since the political dynamics involving the PPACA are treacherous.
—M.T.
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