Industry organizations agree it was a disappointment when at its fall meeting last week the National Association of Insurance Commissioners decided to keep agent commissions on the administrative side of the medical loss ratio blanks — particularly when it appeared the organizations had enough votes to ensure passage of a resolution that would have encouraged the Department of Health and Human Services to accommodate producer compensation in MLR regulations.

“We certainly were disappointed,” says John Prible, vice president of federal government affairs, Independent Insurance Agents & Brokers of America. “We would have liked to see a vote on the amendment since by all appearances we had enough votes to carry the day.”

Instead, the NAIC tabled the resolution without a vote at the Executive Committee level when questions arose as to whether or not the NAIC had the legal authority to make such a recommendation. “Our counsel and some of the other counsels disagree with the NAIC staff on that and thought that it was clearly within legal authority to exclude agent commissions from the premium calculation altogether,” says Prible.

The NAIC did offer up a measure of broker support by creating an Executive Committee subgroup to work with HHS officials on the issue of producer compensation “immediately,” according to Prible.

“We’re excited that the ball is still moving forward,” says Jessica Waltman, senior vice president of government affairs, National Association of Health Underwriters. [Click here to listen to Waltman’s play-by-play of the events leading up to the NAIC’s decision.]

“We’re thrilled that they did put together a working group to work with HHS,” adds Diane Boyle, vice president, federal government relations, National Association of Insurance and Financial Advisors. “I think that was an excellent development. We’re encouraged and excited that they want to continue to work with HHS on how to compensate the agent so that the consumer still has access to the services that we provide.”

However, both Prible and Boyle are skeptical about what, if anything, will come out of the subgroup. “I have to caution that we have zero idea of any kind of certainty about how [HHS] will address this issue or if they will,” says Prible. “All they’ve promised is that they will work with the subgroup. They didn’t promise to actually do anything.”

NAHU is meeting with HHS about the subgroup Oct. 28. “We’re very hopeful that we’ll find a way that’s legal to work this out so that agents and brokers can be fairly compensated under the new law,” says Waltman. “Because everyone agrees that their services are important and that they deserve to be paid for them.”

HHS has until the end of the year to make a final decision on MLR regulations. Boyle doesn’t find it likely that HHS will claim regulatory authority to make a decision on producer compensation when the NAIC has already decided it is not authorized to do so. “I’m somewhat doubtful that HHS or any regulatory body is going to make a decision on that. They’re going to simply punt,” says Boyle. “So if they punt that authority, what could they come up with in the way of ensuring that agents can continue to be adequately compensated? I can’t see any.”

Boyle anticipates “a legislative fix” in the future, but admits it’s an uphill battle that involves going back to Congress to seek a revision to the Patient Protection and Affordable Care Act stating that the MLR provides that carriers’ earned premium does not include commissions. But between the upcoming lame duck Congress and getting to know the new members, Boyle doesn’t anticipate any legislative action any time soon.

Meanwhile, the Big “I” is already hearing from agents and brokers who are getting notices from insurance companies that commission schedules are being changed in anticipation of MLR compliance. Because open enrollment season is in full swing, “we have our backs up against the wall and certainly there’s concern that’s ongoing and magnifying the closer we get to January 1st,” says Prible, “but it’s not time to wave the white flag and surrender. We’re still trying to get this issue addressed satisfactorily.”

Adds NAHU’s Waltman: “We’re urging that they act as quickly as possible and kind of give a hint as to what their direction might be so that the carriers and agents can plan accordingly.”

NAIFA’s diverse range of members are reacting to anticipated reductions in commissions differently, depending on the market they serve. Those primarily working in the large group market are already anticipating putting a greater emphasis on compliance services and possibly implementing an additional fee for those services, while small group and individual brokers whose clients can’t afford a fee “may be looking at putting a greater emphasis on other product lines,” says Boyle.

To further complicate the matter, the industry organizations are investigating reports that a number of states currently prohibit agents from collecting both a fee and a commission. “Some states allow for that and other states have a special license for consultants to accept fees and you might need to be licensed as a consultant,” says Waltman. “So there are definitely avenues that agents and brokers can pursue. It’s just going to depend on your state.”

The next step is to continue to talk with HHS in hopes that the final recommendation’s MLR certification will have “some type of accommodation for agent and broker commissions,” says Boyle.

At the same time, the producer organizations are continuing conversations on Capitol Hill to make sure legislators understand the impact on their members and their clients if commissions are subjected to PPACA’s 15%-20% cap on carriers’ administrative fees. “I think this is just the very beginning of health care reform,” says Boyle. “We thought we were busy the last two years; I think we’re really just getting started.”