Excluding broker commissions from the medical loss ratio would have slashed the more than $1.6 billion in carrier rebates to consumers in 2011 and 2012 by about 75 percent, according to a report from the Government Accountability Office.
GAO found that rebates would have fallen from $1.1 billion to $272 million in 2011 if the commissions and fees carriers paid to agents and brokers had been excluded from the MLRs, and rebates similarly would have fallen from $520 million to $135 million in 2012.
See also: Feds post MLR calculator form
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That would have reduced the average size of a rebate to $15.21 per plan enrollee in 2012, from $58.50.
Brokers have been trying to get their commission out of the MLR provision, arguing carriers have cut their commissions because of it.
Under the MLR provision, carriers must issue refunds to customers if they spend less than 80 percent of the premiums they collect for plans sold on the individual and small group markets and less than 85 percent of plan premiums in the large group market on health care.
The GAO prepared the report at the request of U.S. Sen. John Rockefeller, chairman of the Senate Commerce, Science and Transportation Committee. For the report, the GAO analyzed the MLR data carriers reported to CMS for 2011 and 2012 at the national level for each insurance market — large group, small group, and individual, as well as interviewed eight carriers.
See also: Rockefeller: PPACA MLR rules are working
The report also found that more than three quarters of carriers met or exceeded the standards in 2011 and in 2012, and the median MLRs among all carriers were 88 percent.
Carriers that didn't meet or exceed the MLR standards in 2011 and 2012 paid rebates in the amounts of $1.1 billion and $520 million, respectively, back to enrollees and policyholders who paid premiums in those years.
Carriers in the large group market paid the highest rebate amount ($405 million) across insurance markets in 2011 and insurers in the small group market paid the highest amount ($207 million) in 2012.
According to the GAO, one carrier told them the MLR system was a primary driver behind a major change in broker compensation, while three others said they've reduced payments because of an industry trend toward paying brokers a flat fee per application.
See also: MLR program reviewed
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