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Last week, we heard a disturbing report about insurance companies attempting to sabotage the medical loss ratio, a percentage put into the Affordable Care Act that requires insurers to spend 80-85% of premium revenue on actual medical treatment rather than administrative costs, marketing, overhead, executive salaries and profit. Insurers want to reclassify all kinds of spending as a medical expense, so they can take more and more as profit.
Insurers in violation of MLR rules would have to pay refunds to policyholders. If the health care act had been in effect in 2009, the six largest for-profit health insurance companies would have been required to pay $1.9 billion just for the year, according to the HCAN report. Industrywide, the report stated, MLRs range from 94% to 33% [...]
Franken offered WellPoint (NYSE: WLP) as an example, saying the insurer has reclassified $500 million in administrative costs as medical expenses. A WellPoint spokesman previously said the company now includes in its MLR health and wellness programs, nurse hotlines and weight loss and smoking cessation programs (BestWire, May 10, 2010).
“What they’re trying to do is expand the definition of medical care to include things that simply aren’t medical and in so doing protect their ability to rake in profits at the expense of patients,” HCAN Executive Director Ethan Rome said.
I was able to ask Franken about this in a one-on-one interview at Netroots Nation. He said this was an example of the need to stay vigilant in the implementation process on bills of this nature. “I mean, I like to call what we passed ‘The Health and Human Services Secretary Shall … Act of 2010,’” Franken said, pointing to all the parts of the bill that need to be clarified by that federal agency. However, Franken seemed confident that pressure on the insurers would aid in reducing the amount of reclassification in the system. “It’s not like the medical loss ratio hasn’t been computed before,” Franken said. “I have full confidence that Kathleen Sebelius can get this right.”
John Garamendi, a two-time California Insurance Commissioner and now a Congressman from the Bay Area, agreed that the MLR rules would be implemented properly, mainly because he sent his own reinforcements over to help write them. Gary Cohen, Garamendi’s chief legal counsel throughout his Insurance Commissioner career (and a blogger to boot), has moved to HHS Office of Consumer Information and Insurance Oversight, responsible for the enforcement of rules like the MLR that impact the insurance companies. He knows the tricks and traps that insurers will use to try and get out of the MLR, and should be able to button them up.
However, Garamendi said in an interview that there are two pieces to the medical loss ratio. You have what actually gets included in medical treatment, and you have the premium prices themselves. “It’s an algebra equation,” Garamendi said. “If the insurance companies want to make more profit, they can increase their premiums – in fact, you’re giving them an incentive to do so. Say you want a billion dollars of profit. Just set your prices accordingly and back into it. So we have to control premiums, and there’s nothing in the law yet to do that.” Garamendi said this is a major reason why the public option would have been so helpful in the Affordable Care Act. He hopes to get the new introduction of the public option, which Lynn Woolsey put in last week and which would save $68 billion dollars according to CBO, up for a vote in the near future.
In the meantime, while some manner of rate review gets put together, Franken stressed the importance of working with the federal agencies implementing the laws. “I’ll give you an example, my service dogs bill for wounded veterans,” Franken said. “That made its way through Congress until the conference committee on Appropriations. Someone at Veterans (Affairs Dept.) sounded a thing against it. Now, we meet with them once a month, my staff does, and I personally meet with them every few months to see where the program is going. And that has worked very well. So showing an interest makes a big difference.”
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Don’t get your hopes up Dave. This is the same administration that betrayed us on every other issue. My guess is that the rules were some giant shakedown scheme for campaign money. We’ll reduce the ratio when we see contributions to Blanche, Harry etc….
Al Franken, a good Democrat, failed to deliver. This Better Dem nonsense doesn’t work. The fish truly does rot from the head first. The leadership of the Dem Party is corrupt. Everybody has to get in line behind Harkin’s “foundation” of health care reform, which is really a foundation for mandated insurance buys without the promise of either care or affordability.
Our only hope is creating outside viable third party runs. We need one senator, just one, who’s willing to use Jim Bunning tactics to help poor and middle class people. That would do two things: one those tactics would be outlawed right quick or two we might actually win something for the poor and middle classes. My money is on one..
There are Green party candidates, poorly funded and with the charisma of bank tellers, who are running in South Carolina, Arkansas and Illinois. We should be working to make those candidates “viable”, at least if you want change in our lifetimes. I really don’t think that Obama would mind losing both the house and the senate. That way he can compromise and get just exactly what rich folk want and then say “Look, I have no majorities I had to do something….”
The Democratic Party is simply dead-end of story.
There are a thousand ways to get around that medical-loss requirement. Segregating receivables and payables across a series of SPV’s would make it all but impossible for a regulator to sort out the revenue streams without a massive forensic accounting team. Think of the massive edifice that Enron built to hide debt/losses, imagine that edifice being redesigned to obfuscate money movement inside a health insurer, and you start to get a glimpse of the problem.
You’d say, “But that will be expensive to maintain!” Yes, it will, and that might have been an impediment to creating massive internal laundering structures, were it not for the fact that we’re going to subsidize demand, so there’s no incentive to contain costs at all. The cost of maintaining that edifice will just be absorbed by government largesse.
The Feds don’t currently have the resources to deal with this, even if they wanted to, and the States definitely don’t, and never will.
Exactly.you mean the insurance industry is already trying to cheat everyone? really? who woulda thunk it? Im also sure Kathleen Sabelius can compute the medical loss ratio,so why hasnt she done so yet? why is Al Franken already talking to reporters about a “disturbing report”. Im very grateful to those who are staying on every detail of the implementation of this bill like a bad smell. Most of us wish they wouldnt have passed this rotten bill. Its now the job of all people of conscience to make Kathleen Sebelius wish that too.
As Franken suggests, this is not a press the button once and arrive at your desired floor dynamic. This is a very high stakes game whose defining characteristic is constant, considerable and dynamic tension.
Stop pulling on the rope, stop engaging in zealous oversight and credible regulation of powerful companies and industries, and the public and their government will get dragged so far across the line, they won’t know where they started.
Who could have predicted…
When the draft regulations come out, the public has an opportunity to comment on them. The key to keeping the regulations tight is to have a lot of public comment that aims at eliminating loopholes. To accomplish this requires having some folks who know how the regs can be screwed up creating the descriptions that can drive public comment.
earlofhuntingdon is right on target. Eternal vigilance is the price of liberty.
Are these regulations going to fundamentally prevent these particular types of corporations from setting up SPE’s/SPV’s?
hmmmmmmmm…Based on what ive seen so far im thinkin, no. prob’ly not. uhh uhh.
The leaders gamed the people and the for-profit medical insurance industry /death panels game the people. This food chain is starting to get more than a little scary.
Historic!
Then the regulations barely matter with respect to this medical-loss ratio issue.
This is fundamentally no different than telling Enron or Worldcom, “You have to make 15% profit every quarter.” They’d just construct their financial picture to do exactly that, regardless of whether or not it was true.
The health insurers will do the same, and the regulators won’t be able to keep up.
That depends on what’s in them. As far as I know, the draft regulations have not been issued yet. There was a comment period after the bill was passed for suggestions on how to implement the bill. I suggested back in April that folks here submit comments.
You will know when the draft regulations are available because they will be in the Federal Register. The public will have 30-90 days to comment on them. In addition state regulators in each state are writing regulations for the portions of the bill that are under their purview. So watch news stories in your state about the regulations or contact your insurance commissioner’s department about them. And you can ask them the question you asked me.
After DHHS receives the comments they must address them when they issue the final regulations. Typically, they will batch common issues together and explain why they decided the way they did. A good many comments might not be for provisions not under the act. But I don’t think that DHHS is prohibited from writing accounting and chart of accounts regulations for how to account for medical loss ratio.
Yes, the premium issue is the heart of the problem. And that will require future legislation to deal with costs. There are Democrats running against Republicans who are open to that sort of legislation. Elaine Marshall who is running against Richard Burr is a good example.
Past failure to perform is no guarantee of future wamping out.
As Insurers Game the Medical Loss Ratio, Key Members of Congress Weigh Steps to Fight Back
Public Option? Or am I being too shrill?
Seems to work well for the financial industry.
/s
Yep, that is one of the steps that some members of Congress have mentioned. And they intend to raise it because it cuts $68 billion off the deficit over 10 years.
No, you are not being too shrill. It is exactly the time to start getting shrill again. Right before a midterm election.
We’re not done with them either. The Fed is going to have to go through the same rulemaking and public comment process on financial industry reform. Same drill. Have someone who knows the ins-and-outs (like Masacchio) explain what the regs say and provide some point for public comment. Then organize folks to comment (politely) in their own words and copy the comment to their members of Congress. If we have enough critical mass of people, we can keep the regulations tight. If we leave it up the regulators and Congress, the industry will certainly be commenting. So we might as well apply some countervailing power.
Yes, I think your right. Obama doesn’t care if he loses the Congress. He’ll blame us for that and say he tried, but he didn’t have the votes. Then he’ll proceed to sign anything the Gopers push his way and call it working for the country. I ‘ve had it with these Corporatist. They’ve been playing us like a cheap deck of cards. I won’t play their 3 card Monty games anymore though. I won’t vote for them or give to them or do anything but try and beat these bastards.
Assuming it doesn’t get repealed, Congress will be “fixing” HCR for the next 20 years.
Speak for yourself. You are not qualified to speak for anyone else. Go and try to convince the taliban because I’m not buying your line of snake oil.