I remember when Sen. Rockefeller brought up the MLR of 90% and the CBO called it a government takeover. I was taken aback by the CBO's nakedly partisan analysis.
Taking those differences into account, CBO has determined that setting minimum MLRs [medical loss ratios] under the PPACA at 80 percent or lower for the individual and small-group markets or at 85 percent or lower for the large-group market would not cause CBO to consider transactions in those markets as part of the federal budget.
A proposal to require health insurers to provide rebates to their enrollees to the extent that their medical loss ratios are less than 90 percent would effectively force insurers to achieve a high medical loss ratio. Combining this requirement with the other provisions of the PPACA would greatly restrict flexibility related to the sale and purchase of health insurance. In CBO’s view, this further expansion of the federal government’s role in the health insurance market would make such insurance an essentially governmental program, so that all payments related to health insurance policies should be recorded as cash flows in the federal budget.
Here's also this about the current medical loss ratios in the large employer market, small group market, and the individual market.
Reed Abelson of the New York Times reports that in 2008, the for-profit average medical loss ratio was 84 percent in policies offered to large employers and 80 percent in policies offered to small businesses. In the individual market, there was an average medical loss ratio of 74 percent. Rockefeller specifically accuses CIGNA of breaking the law and inaccurately reporting information to the NAIC -- they had claimed a medical loss ratio of 93 percent.
The percentage of premiums spent on medical claims is known in industry jargon as the “medical loss ratio.” According to the Senate analysis, the for-profit insurers’ average ratio in 2008 was 84 percent in policies offered to large employers, and 80 percent for small employers — those businesses with 50 or fewer workers.
I believe it's good to increase the medical loss ratio for the individual market, but I am very bothered by this loophole in the Senate amendment that allows the Secretary of HHS to lower the medical loss ratiofor the individual market depending on the volatility of the individual market.
‘‘(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 due to the establishment of State Exchanges.”
And here's another loophole far weaker in the House bill that Wonk Room notes. It basically allows the medical loss ratio of 85% in the House bill to expire by 2013, when the exchange gets up and running.
Once the bill is enacted, all health insurance plans would be required to spend at least 85 cents of every dollar paid in premiums each year to providing actual health care. If, in a given year, an insurer doesn’t spend that amount on health care, they would have to give their extra profit back to their customers in the form of rebates. [...]
But there’s a twist to all of this. The version of the bill that was passed by the House last weekend includes the provision, but also includes some curious, new “sunset” language. The sunset language states that the new minimum medical loss ratio requirements “shall not apply to health insurance coverage on and after the first date that health insurance coverage is offered through the Health Insurance Exchange.” In other words, in 2013, when most of the bill takes effect, the medical loss ratio language would be null and void. There would be no more profit control, just the market competition that is provided by whatever form of the public option is included in the bill.
Hopefully when the bill goes to conference, that this would NOT be made weaker in conference by accepting the House version of that loophole. The Senate conservative Democrats have said that they want the final conference bill to be very similar to the Senate bill, so they wouldn't accept changes made for the better in conference or else they'd walk away.
It's also about stringent state enforcement of the medical loss ratio. In many states, state insurance commissioners are either too sympathetic to the insurance industry or don't have the resources to actually put teeth behind the regulations. They'd also be the ones in charge of overseeing the state-based exchanges in the Senate bill. We'd have to keep an eye on that to make sure the administrators of the state-based exchanges aren't the kind of people who would be sympathetic to private insurers, like many state insurance commissioners are, such as Senator Ben Nelson (who was a former insurance commissioner and insurance company executive). For more on how states such as California have problems going after private insurance companies, please click here. This is why a national exchange is far better than a state-based exchange in that it doesn't delegate the regulatory oversight to state insurance commissioners, who are underfunded or too close to special interests.
This Senate health bill is also nowhere near what President Obama had campaigned on in the primaries, as illustrated by Jon Walker in response to Ezra Klein's contention that this Senate bill was what President Obama campaigned on:
To recap: the Senate bill taxes benefits and will result in millions of Americans’ insurance plans changing for the worse. It is not expected to bring down premiums by $2,500 a year. There is an individual mandate forcing you to buy private health insurance, but no real employer mandate. The subsidies will be insufficient to truly make insurance affordable. It does not create a national exchange or a public option. It does not allow for drug re-importation or direct drug price negotiations by Medicare. All the negotiations were conducted in secret, and clearly to the detriment of the American consumer. It is a massive rollback of women’s reproductive rights, something Obama promised to defend vigorously. These are not minor changes. These are core promises of the Obama campaign.
This Senate health care reform bill is nothing like what Obama campaigned on. Obama’s two biggest campaign promises about health care reform–that he repeated over and over again (no individual mandate and no taxes on employer-provided heath insurance)–were both completely broken. If Ezra Klein wants to argue this is still a good bill, he has that right, but he should not try to re-write history. I studied Obama’s campaign promises closely during the campaign, and this is nothing like the health care reform he promised. He did almost everything he promised he would not do, and he kept almost nothing of his most progressive promises to stand up to the powerful industry lobbies
I want us to pass a good bill that actually has stringent regulations, strong price caps on insurance premiums, a hard medical loss ratio of 90%, a community rating of 1:1 like in Europe, and high actuarial values of health plans with little co-pays, a low deductible, and comprehensive benefit coverage along with a public plan. I do not want us to pass this Senate bill based on these points below:
- Forces you to pay up to 8% of your income to private insurance corporations — whether you want to or not.
- If you refuse to buy the insurance, you’ll have to pay penalties of up to 2% of your annual income to the IRS.
- Many will be forced to buy poor-quality insurance they can’t afford to use, with $11,900 in annual out-of-pocket expenses over and above their annual premiums.
- Massive restriction on a woman’s right to choose, designed to trigger a challenge to Roe v. Wade in the Supreme Court.
- Paid for by taxes on the middle class insurance plan you have right now through your employer, causing them to cut back benefits and increase co-pays.
- Many of the taxes to pay for the bill start now, but most Americans won’t see any benefits — like an end to discrimination against those with preexisting conditions — until 2014 when the program begins.
- Allows insurance companies to charge people who are older 300% more than others.
- Grants monopolies to drug companies that will keep generic versions of expensive biotech drugs from ever coming to market.
- No re-importation of prescription drugs, which would save consumers $100 billion over 10 years.
- The cost of medical care will continue to rise, and insurance premiums for a family of four will rise an average of $1,000 a year — meaning in 10 years, your family’s insurance premium will be $10,000 more annually than it is right now.
Here's a video from Not Under The Bus: