By Jane Norman, CQ HealthBeat Associate Editor
November 22, 2010 -- President Obama and the congressional authors of the health care law praised a key rule the Department of Health and Human Services issued on Monday on implementing a standard for medical payouts by insurers. The industry was more guarded in its reaction.
Democrats in Congress included language in the law on a national medical loss ratio (MLR) as a way to curb health insurance premium prices without directly capping them, which politically would have been more difficult. Under the MLR standard, beginning in 2011 insurers will face new mandates on how they spend premium money and must issue rebates if they do not comply.
The MLR standard is complex to explain and not easily captured in a sound bite. And it's part of a law not universally popular. Yet the announcement of the regulation offered battered Democrats a chance to highlight health care, hold out the possibility of rebate money going directly to consumers and again criticize GOP plans for the law's repeal. Beginning in 2012, $1.4 billion worth of rebates may go to policyholders, HHS said.
The law (PL 111-148, PL 111-152) requires that large-group health plans spend 85 percent of premiums on clinical services and activities related to quality of care. For small-group and individual plans, the ratio is 80 percent premiums and 20 percent other costs.
President Obama said in an e-mail statement that the law will mean insurers have to spend money on care rather than advertising costs and executive salaries. "This new rule will make our health care marketplace more transparent and ensure you get the best value for your premium dollars," he said. The e-mail included a link to a video made by Nancy-Ann DeParle, White House director of health reform, explaining the new regulation.
House Speaker Nancy Pelosi, D-Calif., said the new rule "breaks the stranglehold insurance companies have had over our health care decisions and puts power into the hands of the American people, where it belongs."
Senate Finance Chairman Max Baucus, D-Mont., said that it "helps end insurance companies' abuses, including unjustified premium increases."
House Ways and Means Chairman Sander M. Levin, D-Mich., and Pete Stark, chairman of the panel's Health Subcommittee, said in a joint statement that the new standard will help consumers get more value for their health insurance dollars by assuring most of it is spent on medical care.
"By pledging to repeal health reform, House Republicans would eliminate this important protection and allow insurance companies to continue unlimited spending on CEO bonuses, profits and lobbying—and less on patients' health care," Stark said.
"Repeal this?" asked House Education and Labor Chairman, George Miller, D-Calif.
But Rep. Joe L. Barton, a Texas Republican vying to become the new chairman of Energy and Commerce in January, said the new rule was another example of a government takeover of health care.
"Democrats just took a shellacking, but I see that hasn't interfered with the administration's slow march to total federal control over health care decisions," said Barton. "No American objects to getting better service from insurers, but history suggests that when bureaucrats enforce a one-size-fits-all policy, things get worse instead of better."
An advocate for the MLR standard was Sen. John D. Rockefeller IV, D-W.Va., who pushed for it during Senate Finance Committee work on the health care overhaul.
He praised HHS for "standing by consumers." But he also said he was "disappointed" to see that companies offering so-called "mini med" plans with limited benefits are continuing to look for exemptions from the regulations because they cannot meet the new standards. Rockefeller said he will hold a hearing on such plans in the Commerce, Science and Transportation Committee "in the coming weeks."
Karen Ignagni, CEO of America's Health Insurance Plans, which represents the industry, said in a statement that the new rules track closely with recommendations made by the National Association of Insurance Commissioners (NAIC) to HHS. "These regulations acknowledge the potential for individual insurance market disruption and take a first step toward minimizing such disruptions," said Ignagni.
The regulations allow states to ask for a transition period for individual plans in cases where plans might have to go out of business if they had to comply right away.
However, said Ignagni, "the potential for disruption to employer-provided coverage should also be acknowledged and addressed." She said the rule also should take into account the costs of programs to prevent fraud and modernizing claims coding, counting them as medical care rather than administrative costs.
Insurance agents and brokers were more blunt. The Independent Insurance Agents & Brokers of America said in a statement they were disappointed. "We are extremely concerned that this rule will lead to severe market disruption, especially in the individual and small-group markets," said Robert Rusbuldt, the group's president and CEO.
The agents and brokers are worried their profession will be in danger because their commissions won't count as clinical care or quality improvements, under the rule. Charles E. Symington, Jr., senior vice president for government affairs, said if HHS will not change the language before the rule is final, "we hope that Congress will step in and revise the MLR formula through the legislative process."
Advocacy groups who backed the law saw the broker issue differently. The American Cancer Society Cancer Action Network said that it was proper to treat commissions that way and that as much spending as possible by insurers should go toward improving health care.
Stephen Finan, the network's senior policy director, said overall the rule was "strong," though cancer advocates were less comfortable with the exception for the mini-med plans and plan to monitor the experiences of consumers in such plans.
Overall, the rule is "extremely fair," said Ethan Rome of Health Care for America Now, who said it will also be a "data gold mine" for examining insurers' spending.
Nancy LeaMond, executive vice president of AARP, said the rule as a whole strikes a balance between consumers and insurers. "We encourage the Department of Health and Human Services to continue to monitor the effects of the new regulations and make needed adjustments to ensure consumers have access to affordable health coverage and quality care," she said.
