The Government Accountability Office (GAO) agent and broker fees and commissions comprise the largest non-claims cost for insurers in the individual and group markets and, as such, trigger millions of medical loss ratio (MLR) rebates under the MLR rule. GAO published the report, titled Private Health Insurance Early Effects of Medical Loss Ratio Requirements and Rebates on Insurers and Enrollees, on July 10. The MLR rule has resulted in more than $1.6 billion in rebate payments. But if agent brokers and commissions had been excluded from non-claims costs, the amount of rebates would have dropped by about 75%.
Insurer spending on non-claims costs varied by market. The report determined that small group market insurers spent more on agent and broker fees and commissions than insurers in the large group or individual markets. The report also found that while more than 75% of insurers met or exceeded the MLR requirement, those in the group market were more likely to meet the requirement than those in the individual market.
The report surveyed eight insurers regarding the impact of the MLR rule. All eight insurers raised premiums, but four of them reduced agent and broker commissions and fees either by opting for a flat-fee arrangement or lowering commissions. One insurer indicated that the MLR rule guided its decision to lower agent and broker fees and commissions. But the other three insurers cited general trends in the marketplace towards flat-fee arrangements to enable greater predictability and stability for non-claims costs. Five insurers expect reductions in medical claims data variability with the inclusion of three years of data for the MLR calculations for the 2013 MLR calculation.