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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
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:

          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:
           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:


                      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.

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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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 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.)
---------------------------------------------------------------------------
    \2\Small group plans are generally defined as plans with 1 to 100 
employees, but a state may substitute ``50'' employees for ``100'' 
employees until 2016.
    \3\See: http://www.cciio.cms.gov/programs/marketreforms/mlr/state-
mlr-adj-requests.html.
---------------------------------------------------------------------------
    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.)
---------------------------------------------------------------------------
    \4\Of that $1.1 billion, individual market rebates equaled $394 
million, small group market rebates equaled $321 million, and large 
group market rebates equaled $386 million. See: http://
www.healthcare.gov/law/resources/reports/mlr-rebates06212012a.html.
---------------------------------------------------------------------------
    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 one-tenth of a percent by the end of the 10-year 
projection period.\5\
---------------------------------------------------------------------------
    \5\While 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.
---------------------------------------------------------------------------
    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 one-tenth 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. Off-budget (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 estimate 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-as-you-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.

                      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, 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 Premium 
Payments.--
          (1) Requirement to provide value for premium 
        payments.--
                  (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 
                                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 
                                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.

                            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.
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    \1\The ACA is comprised of two public laws, P.L. 111-148 and P.L. 
111-152.
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        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\
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    \2\The 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.
    \3\The ACA, Section 1001.
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    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 requirement 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.
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    \4\The ACA, Section 1001.
    \5\Letter 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).
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    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.
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    \6\Letter 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).
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    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 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.
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    \7\The 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).
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                         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\
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    \8\Letter 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).
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                                   Henry A. Waxman.
                                   Frank Pallone, Jr.