29–006 

112TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 112–694 

ACCESS TO PROFESSIONAL HEALTH INSURANCE 

ADVISORS ACT OF 2011 

NOVEMBER 15, 2012.—Committed to the Committee of the Whole House on the 

State of the Union and ordered to be printed 

Mr. UPTON, from the Committee on Energy and Commerce, 

submitted the following 

R E P O R T 

together with 

DISSENTING VIEWS 

[To accompany H.R. 1206] 

[Including cost estimate of the Congressional Budget Office] 

The Committee on Energy and Commerce, to whom was referred 

the bill (H.R. 1206) to amend title XXVII of the Public Health Service Act to preserve consumer and employer access to licensed independent insurance producers, having considered the same, report 

favorably thereon without amendment and recommend that the bill 

do pass. 

CONTENTS 

Page 

Purpose and Summary ............................................................................................ 2 

Background and Need for Legislation .................................................................... 2 

Hearings ................................................................................................................... 3 

Committee Consideration ........................................................................................ 4 

Committee Votes ...................................................................................................... 4 

Committee Oversight Findings ............................................................................... 6 

Statement of General Performance Goals and Objectives .................................... 6 

New Budget Authority, Entitlement Authority, and Tax Expenditures ............. 6 

Earmarks, Limited Tax Benefits, and Limited Tariff Benefits ........................... 6 

Committee Cost Estimate ....................................................................................... 6 

Congressional Budget Office Estimate ................................................................... 6 

Federal Mandates Statement ................................................................................. 10 

Advisory Committee Statement .............................................................................. 11 

Applicability to Legislative Branch ........................................................................ 11 


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Section-by-Section Analysis of the Legislation ...................................................... 11 

Changes in Existing Law Made by the Bill, as Reported ..................................... 11 

Dissenting Views ..................................................................................................... 14 

PURPOSE AND SUMMARY

H.R. 1206, the ‘‘Access to Professional Health Insurance Advisors 

Act,’’ was introduced on March 17, 2011, by Rep. Mike Rogers (R– 

MI) and was referred to the Committee on Energy and Commerce. 

The purpose of H.R. 1206 is to reduce the economic harm and reduced access to agent and broker services caused by the Patient 

Protection and Affordable Care Act’s (PPACA) medical loss ratio 

(MLR) provision on the nation’s health insurance agent and broker 

community. 

BACKGROUND AND NEED FOR LEGISLATION

Section 1001 of the PPACA requires health plans to spend 80 to 

85 percent of premium revenue on ‘‘reimbursements for clinical 

services’’ and ‘‘activities that improve health care quality.’’ The 

MLR requirement excludes Federal taxes, State taxes, and licensing and regulatory fees from the premium portion of the calculation. On December 1, 2010, the Department of Health and Human 

Services (HHS) issued regulations defining approved activities that 

‘‘improve health care quality’’ and altering the statutory definition 

of taxes for purposes of enforcing the MLR requirement. 

By providing HHS the authority to define ‘‘activities that improve health care quality,’’ the underlying MLR provision gives 

HHS unprecedented control over the design of private health insurance coverage, irrespective of consumer health care preferences. 

Health care providers also have raised concerns that the MLR requirement severely limits investment in programs and initiatives 

to reduce fraudulent payments for services, improve health care 

quality, and advance better care coordination by classifying such 

investments as administrative costs. 

The MLR provision and associated regulation also have major 

economic consequences for independent insurance agents, brokers, 

and health benefit specialists. Brokers and agents provide critical 

support and educational services to individuals and employers 

seeking affordable health coverage and help ensure plans meet a 

consumer’s specific needs. Yet, the MLR requirement includes independent agent and broker fees in an insurer’s MLR calculation and 

classifies fees as an insurer-borne administrative expense. Thus, 

compensation paid to agents and brokers is penalized by the MLR. 

The CEO of the National Association of Health Underwriters 

(NAHU) has testified that brokers servicing the individual and 

small-business markets are seeing revenue slashed by 20 to 50 percent. NAHU survey data also indicate that the MLR will force 21 

percent of agents to downsize their business as a result. 

The National Association of Insurance Commissioners (NAIC) 

also has recognized the harmful consequences of PPACA’s MLR requirement on the health insurance agent and broker community. 

The NAIC passed a resolution in November 2011 asking Congress 

to take legislative action to reduce the adverse impact on agents 

and brokers associated with the MLR requirement. The NAIC resolution stated: 


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We are very concerned about the impact the MLR requirement could have on the ability of insurance agents 

and brokers to continue assisting health insurance consumers at a time of rapid changes that makes their role 

even more essential. . . . Congress should expeditiously 

consider legislation amending the MLR provisions of the 

PPACA in order to preserve consumer access to agents and 

brokers . . . and [HHS] should take whatever immediate 

actions are available to mitigate the adverse effects the 

MLR rule. . . . 

H.R. 1206 amends the MLR requirement to exclude remuneration paid to licensed independent insurance producers from the premium portion of the MLR calculation. H.R. 1206 defines licensed 

independent insurance producers as an insurance agent or broker, 

insurance consultant, benefit specialist, limited insurance representative, and any other person required to be licensed under the 

laws of the particular State to sell, solicit, negotiate, service, effect, 

procure, renew or bind policies of insurance coverage or offer advice, counsel, opinions, or services related to insurance. 

H.R. 1206 also requires HHS to defer to a State’s findings and 

determinations as to whether enforcing the MLR requirement will 

destabilize their respective individual or small group markets for 

health insurance. To date, HHS has partially or fully denied MLR 

waivers for 17 of the 18 States that have applied for an MLR adjustment. HHS has denied waivers despite findings from individual 

state insurance commissioner that without a waiver, the individual 

health insurance market could destabilize significantly and consumer choice in health plans could be limited severely. 

HEARINGS

The Subcommittee on Health held a hearing on June 2, 2011, related to the regulatory burden associated with PPACA. The Subcommittee received testimony from: 

• Steve Larsen, Director, Center for Consumer Information 

and Insurance Oversight, Centers for Medicare and Medicaid 

Services; 

• Scott Harrington, Ph.D., Professor of Health Care Management and Insurance and Risk Management, Wharton School, 

University of Pennsylvania; 

• Janet Trautwein, CEO, NAHU; 

• Randi Reichel, Esq., Counsel, Mitchell, Williams, Selig, 

Gates & Woodyard, P.L.L.C. on behalf of America’s Health Insurance Plans; 

• Edward Fensholt, Senior Vice President, Lockton Benefits 

Group; 

• Katherine Hayes, Associate Research Professor, Department of Health Policy, George Washington University School of 

Public Health and Health Services; and 

• Terry Gardiner, Vice President, Policy and Strategy, Small 

Business Majority. 

The Subcommittee on Health held a hearing on September 15, 

2011, related to the regulatory burden associated with PPACA. The 

Subcommittee received testimony from: 


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• Steve Larsen, Director, Center for Consumer Information 

and Insurance Oversight, Centers for Medicare and Medicaid 

Services; • Janet Trautwein, CEO, NAHU; • Grace-Marie Turner, President, The Galen Institute; • Edmund Haislmaier, Senior Research Fellow, Health Policy Studies, The Heritage Foundation; • Lynn Bates Quincy, Senior Policy Analyst, Consumer 

Union; and • Wendell Blaine Potter, Senior Analyst, The Center for 

Public Integrity. 

COMMITTEE CONSIDERATION

On September 11, 2012, the Subcommittee on Health met in 

open markup session and approved H.R. 1206 for full Committee 

consideration by a voice vote. 

On September 20, 2012, the Energy and Commerce Committee 

met in open markup session and favorably reported H.R. 1206 by 

a recorded vote of 26–14. 

COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representatives requires the Committee to list the record votes on the motion 

to report legislation and amendments thereto. A motion by Mr. 

Upton to order H.R. 1206 reported to the House, without amendment, was agreed to by a record vote of 26 ayes and 14 nays. The 

following reflects the recorded votes taken during the Committee 

consideration: 


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COMMITTEE OVERSIGHT FINDINGS

Pursuant to clause 3(c)(1) of rule XIII of the Rules of the House 

of Representatives, the Committee held a legislative hearing and 

made findings that are reflected in this report. 

STATEMENT OF GENERAL PERFORMANCE GOALS AND OBJECTIVES

The goal of H.R. 1206 is to reduce the economic harm imposed 

by the Patient Protection and Affordable Care Act’s (PPACA) medical loss ratio (MLR) provision on the nation’s health insurance 

agent and broker community. 

NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX

EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the 

House of Representatives, the Committee finds that H.R. 1206, the 

‘‘Access to Professional Health Insurance Advisors Act’’ would result in no new or increased budget authority, entitlement authority, or tax expenditures or revenues. 

EARMARKS, LIMITED TAX BENEFITS, AND LIMITED TARIFF BENEFITS

In compliance with clause 9(e), 9(f), and 9(g) of rule XXI of the 

Rules of the House of Representatives, the Committee finds that 

H.R. 1206, the ‘‘Access to Professional Health Insurance Advisors 

Act,’’ contains no earmarks, limited tax benefits, or limited tariff 

benefits. 

COMMITTEE COST ESTIMATE

The Committee adopts as its own the cost estimate prepared by 

the Director of the Congressional Budget Office pursuant to section 

402 of the Congressional Budget Act of 1974. 

CONGRESSIONAL BUDGET OFFICE ESTIMATE

Pursuant to clause 3(c)(3) of rule XIII of the Rules of the House 

of Representatives, the following is the cost estimate provided by 

the Congressional Budget Office pursuant to section 402 of the 

Congressional Budget Act of 1974: 

U.S. CONGRESS, 

CONGRESSIONAL BUDGET OFFICE, 

Washington, DC, November 7, 2012. 

Hon. FRED UPTON, Chairman, Committee on Energy and Commerce, 

House of Representatives, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for H.R. 1206, the Access to Professional Health Insurance Advisors Act of 2011. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contact is Julia Mitchell. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 


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1 Earned premiums are total premiums received by an insurer net of any taxes, licensing, and 

regulatory fees paid by the insurer and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance. 2Small group plans are generally defined as plans with 1 to 100 employees, but a state may 

substitute ‘‘50’’ employees for ‘‘100’’ employees until 2016. 

H.R. 1206—Access to Professional Health Insurance Advisors Act of 

2011 

Summary: H.R. 1206 would amend current law to exclude compensation paid to insurance agents and brokers from the administrative expenses used to determine the calculation of the medical 

loss ratio (MLR) for health insurance plans. The bill also would 

make waivers of certain requirements under the MLR rules easier 

for states to obtain by requiring the Secretary of the Department 

of Health and Human Services (HHS) to defer to a state’s findings 

that the application of those rules would destabilize the state’s insurance market. Finally, the legislation would extend the availability of such waivers in other ways. 

CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting H.R. 1206 would increase deficits by $531 million over the 2013–2017 period and by about $1.1 billion over the 

2013–2022 period. Of this increase in the deficit, $127 million 

would be a decline in off-budget Social Security revenues between 

2013 and 2022. Pay-as-you-go procedures apply because enacting 

the legislation would affect direct spending and revenues. 

The bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). 

Estimated cost to the Federal Government: The estimated budgetary impact of H.R. 1206 is shown in the following table. The costs 

of this legislation fall within budget function 550 (health). 

By fiscal year, in millions of dollars— 

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013– 

2017 

2013– 

2022 

CHANGES IN DIRECT SPENDING 

Estimated Budget Authority 0 12 77 89 58 41 39 41 43 46 236 447 

Estimated Outlays ............. 0 12 77 89 58 41 39 41 43 46 236 447 

CHANGES IN REVENUES 

Estimated Revenues .......... 0 ¥22 ¥92 ¥97 ¥84 ¥72 ¥71 ¥75 ¥79 ¥83 ¥295 ¥675 

NET INCREASE OR DECREASE (¥) IN THE DEFICIT 

Deficit Impact .................... 0 34 169 185 143 113 110 116 123 129 531 1,122 

On-Budget ................. 0 30 154 169 128 99 96 101 106 112 481 995 

Off-Budget a .............. 0 3 15 16 15 14 14 15 16 17 50 127 

Note: Numbers may not sum to totals because of rounding. 

a All off-budget effects would come from changes in revenues. (The payroll taxes for Social Security are classified as ‘‘off-budget.’’) 

Background: Under current law, fully insured health plans are 

required to provide rebates to enrollees to the extent that the insurer’s medical loss ratio is below a specified percentage. A medical 

loss ratio is equal to spending on health care and quality improvements as a fraction of total premiums earned.1

The MLR is calculated by adding spending for medical claims 

and quality improvement activities together and dividing by earned 

premiums. Individual and small group market plans are required 

to have an MLR of at least 80 percent, and large group plans are 

required to have an MLR of at least 85 percent.2 Administrative 

expenses, including compensation paid to insurance agents and 


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3See: http://www.cciio.cms.gov/programs/marketreforms/mlr/state-mlr-adj-requests.html. 

4Of that $1.1 billion, individual market rebates equaled $394 million, small group market re- bates equaled $321 million, and large group market rebates equaled $386 million. See: http:// 

www.healthcare.gov/law/resources/reports/mlr-rebates06212012a.html. 5While CBO estimates that the MLR policy will reduce premiums relative to those in the absence of the policy, many other factors also affect premiums. On net, CBO estimates that the 

combination of those factors will result in rising premiums overtime. 

brokers, as well as insurer profits account for the remaining 15 

percent to 20 percent (or less) of earned premiums. The Secretary 

of HHS has the authority to temporarily waive the requirement 

that insurers achieve an MLR of at least 80 percent in the individual market if she determines that enforcing the statutory MLR 

would destabilize that market. Such waivers are granted on a 

state-by-state basis and give states additional time to comply with 

the required threshold. For 2011, 17 states applied for waivers and 

7 states were granted them.3 (Of those 7 waivers granted, 4 included modifications for 2012 as well as for 2011. No additional applications for waivers were submitted for 2012.) 

Starting in 2012, plans that do not meet the required MLR 

standards in the previous year must pay a rebate to each enrollee. 

Such rebates are equal to the amount by which the applicable MLR 

standard exceeds the insurer’s actual MLR multiplied by earned 

premiums. According to HHS, insurers have provided enrollees 

with rebates this year that totaled approximately $1.1 billion.4 Rebates may be provided as a reduction in premiums or reimbursed 

directly to enrollees. (CBO incorporates estimated rebate amounts 

in its projections of health insurance premiums.) 

To avoid incurring rebates, insurers can increase their MLR by 

reducing administrative costs or profits, increasing spending on 

medical benefits or quality improvement activities, or a combination of both. As a result of those changes, premiums could be lower, 

higher, or about equal to the levels that would occur in the absence 

of the MLR policy. In CBO’s judgment, informed by discussion with 

outside experts, premiums are probably lower under the MLR policy than they would have been otherwise. 

For 2011 and 2012, CBO estimated the magnitude of the reduction in premiums resulting from the MLR policy. That estimate 

draws on insurance industry data and is based on two factors: actual rebates in 2012, and evidence that insurance carriers reduced 

administrative costs (in large part by reducing agent and broker 

compensation). 

Beyond 2012, in CBO’s judgment, the MLR policy under current 

law will continue to have the effect of reducing premiums relative 

to those in the absence of that policy. Over time, however, CBO expects that the reduction in premiums will be attenuated. Starting 

in 2014, a three-year moving average, rather than annual data, 

will be used to calculate the MLR, making the MLR targets easier 

to achieve. In addition, CBO expects that there is an increasing 

probability that insurers will make changes—such as increasing 

spending on medical benefits or quality improvement activities— 

that will push premiums upward. 

Overall, CBO estimates that the MLR requirements under current law will reduce premiums by about one-half of a percent, on 

average, over the next few years, declining to approximately onetenth of a percent by the end of the 10-year projection period.5


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Basis of estimate: H.R. 1206 would exclude fees, commissions, 

and rebates paid to licensed independent insurance agents and brokers (or other individuals licensed by the state to sell or assist in 

the sale or renewal of insurance) from administrative expenses for 

the calculation of the medical loss ratio of a health insurance plan. 

The bill also would change the rules for consideration of state requests for waivers in ways that would make those waivers easier 

to obtain. In addition, the bill would allow states to request waivers 

for the small group market. For this estimate, CBO assumes that 

the legislation would be enacted near the end of 2012 and become 

effective for plan years that begin at the start of 2014. 

Under H.R. 1206, agent and broker compensation would no 

longer be considered an administrative expense for the purpose of 

calculating MLRs, making the MLR requirements easier for plans 

to achieve. By making these targets easier to achieve, H.R. 1206 

would reduce the number of plans required to pay rebates and the 

amount of rebates paid. 

CBO estimates that removing agent and broker compensation 

from the MLR calculation would initially reduce rebates by between 60 percent to 70 percent, declining to between 40 percent 

and 50 percent by the end of the 2013–2022 period. Because MLR 

requirements would be easier to achieve under H.R. 1206, insurers 

would have less incentive to reduce administrative costs than 

under current law, CBO estimates. Both of these effects are expected to result in an increase in premiums relative to current law. 

H.R. 1206 would also increase the probability that more states 

would be able to waive or obtain modifications to the MLR requirements because the Secretary of HHS would have to defer to a 

state’s own assessment of market destabilization. The estimate incorporates increased waiver activity in the individual market and 

new waivers in the small group market in a smaller number of 

states. Because waivers allow plans to face lower MLR thresholds, 

increased waivers are also expected to increase net premiums. 

Overall, CBO assumes that enacting H.R. 1206 would have the 

effect of increasing premiums by approximately two-tenths of a percent on average over the next few years, declining to less than onetenth of a percent by the end of the 2013–2022 period. 

Overall impact on Federal spending and revenues 

According to CBO and JCT’s estimates, enacting H.R. 1206 

would increase direct spending by an estimated $236 million over 

the 2013–2017 period and $447 million over the 2013–2022 period. 

Further, H.R. 1206 would reduce revenues by $295 million over the 

2013–2017 period and $675 million over the 2013–2022 period. Offbudget (Social Security) revenues would account for $127 million of 

that revenue reduction over the 10-year period. 

Direct spending 

Because H.R. 1206 would increase private health insurance premiums, CBO estimates that subsidies for health insurance purchased through the exchanges would rise. Subsidies for health insurance premiums are structured as refundable tax credits; the 

portions of such credits that exceed taxpayers’ liabilities are classified as outlays, while the portions that reduce tax payments are reflected in the budget as reductions in revenues. CBO and JCT estiVerDate Mar 15 2010 00:49 Nov 17, 2012 Jkt 029006 PO 00000 Frm 00009 Fmt 6659 Sfmt 6602 E:\HR\OC\HR694.XXX HR694

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mate that the outlay portion of the increased payments for premium subsidies available through exchanges would be $236 million 

over the 2013–2017 period and $447 million over the 2013–2022 

period. 

Revenues 

The effect of the bill on the cost of subsidies for purchasing 

health insurance through exchanges would decrease revenues by 

$22 million over the 2013–2017 period and $38 million over the 

2013–2022 period, CBO and JCT estimate. 

H.R. 1206 also would increase premiums for employer-based 

health insurance. By increasing the share of employee compensation furnished as tax-excluded health benefits rather than as taxable wages and salaries, CBO and JCT estimate that revenues will 

decrease by $637 million over the 2013–2022 period. Decreases in 

such wages and salaries lead to decreases in both federal income 

tax and payroll taxes for Social Security and Medicare. 

Pay-As-You-Go considerations: The Statutory Pay-As-You-Go Act 

of 2010 establishes budget-reporting and enforcement procedures 

for legislation affecting direct spending or revenues. The net 

changes in outlays and revenues that are subject to those pay-asyou-go procedures are shown in the following table. Only on-budget 

changes to outlays or revenues are subject to pay-as-you-go procedures. 

CBO ESTIMATE OF PAY-AS-YOU-GO EFFECTS FOR H.R. 1206, AS ORDERED REPORTED BY THE 

HOUSE COMMITTEE ON ENERGY AND COMMERCE ON SEPTEMBER 20, 2012 

By fiscal year, in millions of dollars— 

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2013– 

2017 

2013– 

2022 

NET INCREASE OR DECREASE (¥) IN THE ON-BUDGET DEFICIT 

Statutory Pay-As-You-Go Impact ................................... 0 30 154 169 128 99 96 101 106 112 481 995 

Memorandum: 

Changes in Outlays ...... 0 12 77 89 58 41 39 41 43 46 236 447 

Changes in Revenues ... 0 19 76 81 69 58 56 60 63 66 245 548 

Intergovernmental and private-sector impact: H.R. 1206 contains 

no intergovernmental or private-sector mandates as defined in 

UMRA and would not affect the budgets of state, local, or tribal 

governments. 

Estimate prepared by: Federal Costs: Julia Mitchell, Sarah 

Anders, and staff of the Joint Committee on Taxation; Impact on 

State, Local, and Tribal Governments: Lisa Ramirez-Branum; Impact on the Private Sector: Alexia Diorio. 

Estimate approved by: Holly Harvey, Deputy Assistant Director 

for Budget Analysis. 

FEDERAL MANDATES STATEMENT

The Committee adopts as its own the estimate of Federal mandates prepared by the Director of the Congressional Budget Office 

pursuant to section 423 of the Unfunded Mandates Reform Act. 


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ADVISORY COMMITTEE STATEMENT

No advisory committees within the meaning of section 5(b) of the 

Federal Advisory Committee Act were created by this legislation. 

APPLICABILITY TO LEGISLATIVE BRANCH

The Committee finds that the legislation does not relate to the 

terms and conditions of employment or access to public services or 

accommodations within the meaning of section 102(b)(3) of the Congressional Accountability Act. 

SECTION-BY-SECTION ANALYSIS OF THE LEGISLATION

Section 1. Short title 

This section cites the act as the ‘‘Access to Professional Health 

Insurance Advisors Act of 2011.’’ 

Section 2. Findings 

This section includes findings related to the importance of the 

role of health insurance agents and brokers in our health care system and the need to recognize and protect their continued role. 

Section 3. Protecting the ability of licensed independent insurance 

producers to continue to serve the public 

This section excludes remuneration paid to licensed insurance 

producers from the premium portion of the MLR calculation and 

requires HHS to defer to State findings and determinations regarding destabilization of their respective insurance markets. 

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the 

House of Representatives, changes in existing law made by the bill, 

as reported, are shown as follows (new matter is printed in italic 

and existing law in which no change is proposed is shown in 

roman): 

PUBLIC HEALTH SERVICE ACT 

* * * * * * * 

TITLE XXVII—REQUIREMENTS RELATING TO HEALTH 

INSURANCE COVERAGE 

PART A—INDIVIDUAL AND GROUP MARKET 

REFORMS 

* * * * * * * 

Subpart II—Improving Coverage 

* * * * * * * 

SEC. 2718. BRINGING DOWN THE COST OF HEALTH CARE COVERAGE. 

(a) CLEAR ACCOUNTING FOR COSTS.—A health insurance issuer 

offering group or individual health insurance coverage (including a 

grandfathered health plan) shall, with respect to each plan year, 


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submit to the Secretary a report concerning the ratio of the incurred loss (or incurred claims) plus the loss adjustment expense 

(or change in contract reserves) to earned premiums. Such report 

shall include the percentage of total premium revenue, after accounting for collections or receipts for risk adjustment and risk corridors and payments of reinsurance, that such coverage expends— 

(1) * * * 

* * * * * * * 

(3) on all other non-claims costs, including an explanation of 

the nature of such costs, and excluding Federal and State 

taxes, remuneration paid for licensed independent insurance 

producers, and licensing or regulatory fees. 

* * * * * * * 

(b) ENSURING THAT CONSUMERS RECEIVE VALUE FOR THEIR PRE- MIUM PAYMENTS.— (1) REQUIREMENT TO PROVIDE VALUE FOR PREMIUM PAY- MENTS.— 

(A) REQUIREMENT.—Beginning not later than January 1, 

2011, a health insurance issuer offering group or individual health insurance coverage (including a grandfathered health plan) shall, with respect to each plan year, 

provide an annual rebate to each enrollee under such coverage, on a pro rata basis, if the ratio of the amount of premium revenue expended by the issuer on costs described 

in paragraphs (1) and (2) of subsection (a) to the total 

amount of premium revenue (excluding Federal and State 

taxes, remuneration paid for licensed independent insurance producers, and licensing or regulatory fees and after 

accounting for payments or receipts for risk adjustment, 

risk corridors, and reinsurance under sections 1341, 1342, 

and 1343 of the Patient Protection and Affordable Care 

Act) for the plan year (except as provided in subparagraph 

(B)(ii)), is less than— 

(i) * * * 

(ii) with respect to a health insurance issuer offering 

coverage in the small group market or in the individual market, 80 percent, or such higher percentage 

as a State may by regulation determine, except that 

the Secretary may adjust such percentage with respect 

to a State if the Secretary determines that the application of such 80 percent may destabilize the individual 

market or small group market in such State. 

In the case of a State request for an adjustment pursuant 

to clause (ii), the Secretary shall defer to the State’s findings and determinations regarding destabilization. 

(B) REBATE AMOUNT.— 

(i) CALCULATION OF AMOUNT.—The total amount of 

an annual rebate required under this paragraph shall 

be in an amount equal to the product of— 

(I) * * * 

(II) the total amount of premium revenue (excluding Federal and State taxes, remuneration 

paid for licensed independent insurance producers, 

and licensing or regulatory fees and after accountVerDate Mar 15 2010 00:49 Nov 17, 2012 Jkt 029006 PO 00000 Frm 00012 Fmt 6659 Sfmt 6602 E:\HR\OC\HR694.XXX HR694

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ing for payments or receipts for risk adjustment, 

risk corridors, and reinsurance under sections 

1341, 1342, and 1343 of the Patient Protection 

and Affordable Care Act) for such plan year. 

* * * * * * * 

(d) ADJUSTMENTS.—The Secretary may adjust the rates described 

in subsection (b) if the Secretary determines appropriate on account of the volatility of the individual market or small group market due to the establishment of State Exchanges. 

* * * * * * * 

(f) INDEPENDENT INSURANCE PRODUCER REMUNERATION DEFINITIONS.—For purposes of this section: 

(1) The term ‘‘independent insurance producer’’ means an insurance agent or broker, insurance consultant, benefit specialist, limited insurance representative, and any other person 

required to be licensed under the laws of the particular State 

to sell, solicit, negotiate, service, effect, procure, renew or bind 

policies of insurance coverage or offer advice, counsel, opinions, 

or services related to insurance. 

(2) The term ‘‘remuneration’’ means compensation paid by or 

accrued from an insurance issuer or health plan for services 

rendered under contractual agreement which may include fees, 

commissions, or rebates. 


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1The ACA is comprised of two public laws, P.L. 111–148 and P.L. 111–152. 2The Public Health Service Act, Section 2718, as added by section 1001(5) of the Patient Protection and Affordable Care Act and amended by section 10101(f) of the Health Care and Education Reconciliation Act of 2010. 3The ACA, Section 1001. 4The ACA, Section 1001. 5Letter from the National Association of Insurance Commissioners to Kathleen Sebelius, Secretary of the Department of Health and Human Services (Oct. 7, 2010) (online at www.naic.org/ 

documents/committees_ex_mlr_reg_asadopted.pdf). 

DISSENTING VIEWS 

We oppose the passage of H.R. 1206, the Access to Professional 

Health Insurance Advisors Act of 2011, a bill to amend title XXVII 

of the Public Health Service Act, as added by section 1001(5) and 

amended by section 10101(f) of the Affordable Care Act or ACA,1

relating to the calculation and requirements of the medical loss 

ratio (MLR) of a health insurance plan. Accordingly, we submit the 

following comments to express our concerns that H.R. 1206 will undermine a critical consumer protection provided Americans by the 

ACA and will result in increased health care premiums for individuals, families, and businesses. 

THE MEDICAL LOSS RATIO IS A CRITICAL CONSUMER PROTECTION

The ACA created new consumer protections to establish greater 

transparency in the health insurance marketplace and to encourage health insurers to deliver higher quality health care at lower 

premiums. The law requires insurance companies to publicly disclose the proportion of premium revenues spent on health care benefits and quality improvement as opposed to profits, marketing and 

other administrative costs, which is called the medical loss ratio 

(MLR). For the first time, insurers are also required to meet minimum MLR standards established by the ACA of spending 80 to 85 

cents of each premium dollar on medical care or quality to ensure 

that consumers receive value for their premium dollar.2 If an insurance company spends less than 80 cents of each premium dollar on 

medical benefits or quality (85% for large group market insurers), 

they must issue rebates to consumers by August 1 each year.3

The ACA required the National Association of Insurance Commissioners (NAIC) to develop a model regulation containing uniform definitions and methodologies for calculating the medical loss 

ratio.4 On October 27, 2010, the NAIC submitted its final recommendations to the Department of Health and Human Services 

(HHS). The regulation outlines were unanimously approved by 

every state insurance commissioner including the District of Columbia after months of work via an open and public process in 

which a wide range of stakeholders participated.5 On December 12, 

2010, HHS issued regulations regarding the implementation of the 

MLR requirements based on these recommendations. The NAIC 

was careful to take into account the impact of the MLR requireVerDate Mar 15 2010 00:49 Nov 17, 2012 Jkt 029006 PO 00000 Frm 00014 Fmt 6604 Sfmt 6604 E:\HR\OC\HR694.XXX HR694

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6Letter from Douglas W. Elmendorf, Director, Congressional Budget Office, to Rep. Fred 

Upton, Chairman, Committee on Energy and Commerce (November 7, 2012) (online at 

www.cbo.gov/sites/default/files/cbofiles/attachments/hr1206.pdf). 

ment on the stability of state markets, and the ability of insurance 

agents and brokers to continue their work with insurance commissioners. There are allowances in the formula for administrative 

costs for fighting fraud and for quality improvement activities such 

as flu shot drives. 

BENEFITS ALREADY ACHIEVED FROM THE MEDICAL LOSS RATIO

PROTECTION

On June 12, 2012, insurance companies nationwide submitted 

their annual MLR reports for coverage to the Secretary of HHS. 

Based on this data, nearly 90% of insurers already either met or 

took steps to meet the medical loss ratio minimums. The remaining 

insurers provided rebates to nearly 12.8 million Americans this 

year totaling more than $1.1 billion. In addition, according to the 

Congressional Budget Office (CBO), this consumer protection likely 

reduced health insurance premiums.6 This is a big victory for consumers purchasing insurance not only in the individual market but 

also through their employers. 

The NAIC’s Health Care Reform Actuarial Working Group issued 

a report that, among other things, found states with higher MLR 

requirements have not observed any problems with consumer access to insurance or agents and brokers. Indeed, agent and broker 

jobs increased by 7,000 since May of last year according to the Insurance Information Institute. 

EFFECTS OF H.R. 1206

H.R. 1206 undermines this critical consumer protection that 

nearly all insurers have already met by excluding broker and agent 

fees and commissions from the MLR calculation. According to CBO, 

H.R. 1206 effectively weakens the pressure on insurers to hold 

down administrative healthcare costs and will increase health insurance premiums. The NAIC report also stated that adjusting the 

MLR calculations for agent and broker compensation would effectively weaken the MLR by several percentage points. 

The exclusion of the agent and broker commissions from the 

MLR formula would also negate 60% to 70% of rebates expected to 

be paid in the coming years according to the CBO. This is similar 

to a projection issued by the National Association of Insurance 

Commissioners. 

H.R. 1206 also changes the ACA by allowing states to apply a 

weaker MLR requirement for their small group markets, increasing 

health insurance premiums further according to CBO. The ACA already allows states to apply for adjustments to the MLR requirement for their individual market, but not in the small or large 

group markets, in cases where the HHS Secretary determines that 

a state’s marketplace is noncompetitive and too highly concentrated 

such that the MLR requirement would destabilize the marketplace 

and availability of insurance. H.R. 1206 further changes this by deferring to a state request to undermine this critical consumer protection in both the individual and small group markets, providing 


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7The Center for Consumer Information & Insurance Oversight, State Requests for MLR Adjustment (online at www.cciio.cms.gov/programs/marketreforms/mlr/state-mlr-adj-requests.html). 8Letter from Douglas W. Elmendorf, Director, Congressional Budget Office, to Rep. Fred 

Upton, Chairman, Committee on Energy and Commerce (November 7, 2012) (online at 

www.cbo.gov/sites/default/files/cbofiles/attachments/hr1206.pdf). 

less oversight. So far, 18 states (including Guam) have applied for 

such adjustments and seven states provided data supporting the 

request such that it was granted.7 If H.R. 1206 had already been in effect, it would have reduced the $1 billion consumer premium 

rebates insurers paid out by at least $360 million, increasing premiums for the 3.8 million people in Delaware, Florida, Indiana, 

Kansas, Louisiana, Michigan, North Dakota, Oklahoma, Texas, and 

Wisconsin. 

CBO SCORE OF H.R. 1206

CBO released a score on November 7, 2012, estimating that H.R. 

1206 would increase deficits by $531 million over the 2013–2017 

period and by about $1.1 billion over the 2013–2022 period. H.R. 

1206 would make it easier for insurers to meet the MLR targets, 

and provide less incentive for insurers to reduce administrative 

costs. The result would be a drastic reduction in consumer rebates 

and an increase in insurance premiums. CBO expects that rebates 

would initially be reduced by 60% to 70%, declining to 40% to 50% 

by the end of the 2013–2022 period. H.R. 1206 would increase the 

probability that states would be able to obtain a waiver or an adjustment to their MLR requirement which would result in an increase in net premiums for both individual and employer-based 

health insurance plans. According to CBO, premiums would increase on average by about two-tenths of a percent over the next 

few years, declining to less than one-tenth of a percent over the 

next ten years.8

HENRY A. WAXMAN. 

FRANK PALLONE, JR. 

Æ 


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