The new healthcare law has significantly changed how individual medical insurance plans are sold, according to Assurant Health’s president and ceo. Minimum loss ratios or “MLR’s” are now in place which means health insurance companies are now required to spend 80 cents on every premium dollar to pay medical claims (individual medical insurance market). Previously, this figure was as low as 50 cents in the first year for some medical insurance plans. Proponents of MLR’s contend they will make medical insurance more affordable because excessive costs are being removed from premium dollars.
Assurant Health and other insurance companies serving the individual medical insurance market were forced to significantly cut commissions to agents as much as 50% on January 1, 2011, said Adam Lamnin. Assurant Health, however, has been lobbying for agents since the start of the national debate on health reform, and as the law was taking shape, he said.
The industry is working on how to make sure “the economics work for everyone involved in distribution,” said Lamnin, who took the helm as Assurant Health’s CEO in January.
Under the new healthcare law, commissions to agents and brokers are not considered medical care expenses. Health insurance companies in the individual medical insurance and small employer group health markets are required to devote 80% of premiums to covering medical costs. The law also will require insurers to provide rebates to policyholders starting in 2012, for premiums paid in the previous year, if these standards aren’t met.
Buying individual medical insurance is complex, and agents “are integral to that transaction,” said Lamnin, addressing why administrative expenses tend to be high in this market. Agents help buyers navigate through the process, understanding things such as co-payments and deductibles, he said.
Assurant Health is trying to show agents “a path forward,” Lamnin said. For example, the company has a system that allows its agents to “easily attach” supplemental health plans to both its core individual medical and fixed-indemnity plans, he said.
Fixed-indemnity plans are a big part of Assurant Health’s strategy going forward because they’re not impacted by the MLR regulations, Lamnin said.
The plans, also known as fixed-benefit plans, pay a set cash amount when the insured receives a particular service, regardless of what their provider charges. Examples include voluntary/supplemental health plans such as critical illness protection insurance, hospital indemnity, accident, individual dental insurance and vision, according to Assurant Health. They’re sometimes known as scheduled-benefit plans.
Fixed-indemnity plans, however, will not be sold in the state health insurance exchanges starting in 2014 but agents will continue to offer them, Lamnin said.
Earlier this summer, agents and brokers hailed a move by the National Association of Insurance Commissioners to lend support to moves to exclude producer compensation from MLR calculations (BestWire, July 1, 2011). The NAIC’s Professional Health Insurance Advisors Task Force task force endorsed HR 1206, a bill from Rep. Mike Rogers, R-Mich., which would remove producer compensation from the MLR.
Assurant Health, part of the publicly held Assurant Inc., sells major medical insurance and fixed-indemnity plans for individuals, families and small businesses. It works with more than 150,000 agents nationwide, including agents who are employees of the company, Lamnin said.
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