NAIC, That Was A Close Call

Kathleen Sebelius speaking after her official ...

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Whew, that was a close call.  As a health insurance agent, I almost could count on my regulatory career politicans to back me up.  Fortunately, they remained consistent and through anyone associated with health insurance as a professsion under the bus.  That includes agents.

Last Thursday the National Association of Insurance Commissioners (NAIC) approved a set of rules to forward to Secretary of HHS, Kathleen Sebelius to define what is and is not a “medical expense.”  Under the PPACA, as of January 1, 2011 health insurance companies are required to spend 80-85% of the premiums they take in on patients medical care. This is refered to in the legislation as the Medical Loss Ratio (MLR)  They are only allowed 15-20% of premiums to pay for their entire overhead.

I understand, and concur with the goal of the MLR.  In a country seathing over recent bailouts and bonuses the politicians wanted to restrict high executives from granting themselves bonuses.  Unfortunately, I am not certain they thought it through before they inserted this restriction into the legislation.

I am a health insurance agent.  I have been involved in health insurance for 23 years.  In addition to my experience I am well educated.  I earned a liberal arts Batchelor degree from a college in Tennessee and the CLU designation from the American College.  With all the education and experience I have, I have been able to afford to raise two boys with a solid middle class upbringing but have never made over $ 250,000 in any year.

The insurance companies attempted to include agents commissions and marketing expenses as acquisition costs and not subject to the MLR.  Technically, what I do is not medical care and I understand what is about to happen.  That still does not make me happy about it.

When the MLR rules go into effect in 2 months the insurance companies will have 2 options that I can think of.

  1. Several insurance companies have gone on record saying that unless they are granted waivers to phase in the new restrictions, they will go out of business.  Only time will tell the public if that is an empty threat or the truth.  Already some companies have elected to withdraw from select markets in the wake of Obamacare.

Ironically, the legislation that was sold to America on the premise of stimulating competition is doing the exact opposite.

2. The amount the PPACA allows health insurance companies to use for their overhead  is so restrictive that those companies who elect to comply with the law and remain in business will not only reduce agent’s commissions but lay off hundreds of home office employees.

The national unemployment rate for September was 9.5%.  Unless Sebelius grants sufficient waivers to allow insurance companies to pay the salaries of current employees, we could see double digit unemployment rates when insurance companies lay off staff in the first quarter of next year.

My fellow health insurance agents and salaried staff are just collateral damage.  The politicians were aiming at the highly paid executives and decided that it was a small price to pay to take out the grunts who do the actual work as long as they got the figure head.

The funny thing is, when the dust clears and the end of 2011 comes, the same executives they were aiming at will still give themselves exorbitant bonuses while the rest of us have no jobs.

Fortunately, however, Barack Obama will be able to pay taxes on $ 5,000,000 in April.   After all, that is all any good American could ask for, isn’t it?   I guess it pays to have no regard for working people.

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About The Insurance Barn

Husband of 1, father of 2, health insurance agent and insurance trainer.
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