As part of the Affordable Care Act, health insurers must spend at least 80% of the money they earn from premiums on actually providing health care, with the remaining cash used to cover all administrative, advertising and payroll costs. Those insurers with plans that don’t follow this ratio are soon supposed to start giving the extra money back in refunds and discounts. But new legislation introduced in the Senate this week could jeopardize this, while giving insurance companies even more money to stick in their dog pillows.
The bill, introduced by Senator Mary Landrieu of Louisiana and co-sponsored by John Isakson of Georgia, Lisa Murkowski of Alaska and Nebraska’s Ben Nelson, is intended “to preserve consumer and employer access to licensed independent insurance producers,” by eliminating insurance broker commissions from the administrative overhead.
So under the current rules, an insurer that takes in $100 million dollars in premiums must spend $80 million on paying for health care and those broker commissions are included in the remaining $20 million.
But if this bill becomes law, those commissions — let’s just put a number of $3 million on them for this example — would no longer be part of the equation. That would mean the insurer would only have to spend $77.6 million on health care but would now have $22.4 million to use for its own purposes.
The National Association of Insurance found that altering the rule to remove broker compensation will result in a loss of more than 60% of forthcoming rebates for consumers.
“In just a few short months insurers must pay back consumers for wasting their money on inefficient overhead and excessive profit. But this bill would just put that money back into the hands of insurance companies” said Lisa Swirsky, Policy Analyst with Consumers Union. “This is a giveaway to big insurance and a significant loss for consumers struggling to afford health insurance.”
“The single biggest complaint we hear about health insurance is ever-increasing premiums,” said Swirsky. “This bill erodes the biggest tool we have for reigning in insurance companies and fighting rising insurance costs.”