Healthcare Business News

Reform seen hitting insurance competition, brokers

By Rich Daly
Posted: August 29, 2011 - 3:30 pm ET

Both private insurance competition and insurance brokers are taking hits under the 2010 federal healthcare law, and those impacts are expected to increase, according to a Government Accountability Office report (PDF).

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An update on the implementation of the law's medical-loss ratio provisions found that some insurers were cutting back their business in some states because their low market share might lead them afoul of the law.

For example, one large insurer that operates in multiple states told GAO auditors that the company exited the individual market in one state where they had a smaller market share, in part, because of the MLR requirements. The same company was evaluating whether to exit the same market in other states where it would have difficulty meeting the same requirements.

Similarly, the GAO reported that another insurer reported plans to exit or stop issuing new business in the individual market in multiple states. Officials at another insurer told the GAO that they are considering eliminating some of their high- and mid-level deductible plans in response to the law.

However, “several” insurers said the law's MLR requirements will not affect decisions on where they do business.

The law's impacts on insurance brokers included almost all of the interviewed insurers reporting plans to reduce brokers' commissions.

“These insurers said that they have decreased or plan to decrease commissions to brokers in an effort to increase their MLRs,” noted the GAO report.

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