Health insurance agents and brokers, collectively called "producers" by insurance companies, assist consumers in choosing and enrolling into insurance products, generally sold in the individual and small group markets. Little is known about these costs in relation to premiums. Approximately 24 million Americans are expected to enroll in individual and small group qualified health plans (QHPs) offered through the health insurance exchanges established by the Patient Protection and Affordable Care Act ( P.L. 111-148 , PPACA) as amended. Thus, there will be an incentive for insurance companies to cut back on the use of producers or reduce their commissions in order to rein in their administrative expenses. This report provides a brief background on the federal and state roles in regulating insurance producers and the potential impact of the relevant PPACA provisions on the use of producers by health insurance companies. Regulation Impacting Producers

		State Regulation

With the exception of government sponsored insurance programs (e.g., Medicare Advantage) producer activity is generally regulated by the states. PPACA establishes a federal role in developing standards for producer activity in the exchanges by requiring that the Secretary promulgate procedures under which a state may allow producers to enroll individuals and employers in QHPs and assist eligible individuals in applying for premium tax credits and cost-sharing reductions for plans sold through an exchange. The MLR refers to the percentage of premium revenues spent on medical claims.
Health insurance agents and brokers, collectively called "producers" by insurance companies, assist consumers and small employers in choosing and enrolling in health insurance products. Producers are licensed and regulated by the states. Traditionally, the federal government has had no role in regulating producer activities outside of federal programs such as Medicare Advantage. The Patient Protection and Affordable Care Act (P.L. 111-148, PPACA), as amended, creates a limited federal role in developing standards for the use of producers in the health insurance exchanges, which are competitive regulated markets effective January 1, 2014. The additional regulation of producers and alternative health insurance information (e.g., the online insurance portal) and assistance services available to consumers may limit the traditional demand for producers' services.
PPACA also has a minimum medical loss ratio provision requiring plans to pay rebates to their members if a certain percentage of their premiums are not spent on medical costs. This provision may provide an incentive for health insurance companies to reduce their compensation to and/or utilization of producers as they seek to reduce their administrative costs in relation to their medical costs.
This report will be updated to reflect relevant legislative and regulatory activity.