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Senate Bill Could Roll Back Consumers’ Health Insurance Savings

Lena Groeger
ProPublica / News Report
Published: Saturday 17 March 2012
“This summer, health insurance companies may have to pay more than a billion dollars back to their own customers.”
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This summer, health insurance companies may have to pay more than a billion dollars back to their own customers.  The rebate requirements were introduced as part of the 2010 health-care reform law and are meant to benefit consumers.  But now an insurer-supported Senate bill aims to roll back the rebate requirements.

Known as the medical loss ratio rule, it’s actually pretty simple.  Under the health-care law provision, 80 to 85 cents of every dollar insurers collect in premiums must be spent on medical care or activities that improve the quality of that care.  If not, they must send their customers a rebate for the difference.  The goal, according to the Department of Health and Human Services, is to limit the money insurers spend on administrative costs and profit.

“It essentially ensures that consumers receive value for every dollar they spend on health care,” HHS spokesman Brian Chiglinsky told ProPublica.

Last month, Sen. Mary Landrieu, D-La., introduced a bill that would change what costs companies can include in the 15 to 20 percent they are allotted for overhead, salaries and marketing.  The bill, similar to a House bill introduced in March 2011 that has yet to come up for a vote, focuses on payments to insurance agents and brokers.  Traditionally, these commissions are bundled into the administrative costs when making the final calculation.  But insurance regulators have argued that fees paid to insurance agents and brokers shouldn’t count.

Such a change could mean big savings for insurance companies — and much smaller rebates for consumers.

This is the first year that companies are required to send out rebates.  According to a report by state insurance commissioners, if rebates had been handed out last year, insurers would have had to pay consumers almost $2 billion.  If they had carved out the broker fees, as proposed in the two current bills, consumers would have gotten only about $800 million.

Landrieu’s office did not immediately respond to our call for comment.

“[The bills] would water down the standard to a point where it becomes ineffective,” said Sondra Roberto, a spokeswoman for the nonprofit advocacy group Consumers Union.  The group, which also publishes Consumer Reports, recently urged members to oppose the bill.

The rebates have gotten relatively modest attention.  Only 38 percent of the public is even aware of the rule’s existence, according to a Kaiser poll.

Insurance companies have supported the two bills, claiming that the rebate rule, as it stands now, stifles jobs and actually drives up insurance premiums.  A 2011 government report found that most insurance companies were, in fact, lowering their premiums to meet the requirements, as the administration had hoped.

While most insurance companies hit the 80 to 85 percent target, the few that didn’t may be required to send out rebates this year.

"Some insurance companies pay an inordinate amount, as much as 40 percent, on administration and profit and not health care," Roberto said.

The rules on rebates differ slightly depending on whether the insurance comes from a large-group plan (employers with more than 100 employees), or a small-group or individual plan.  In each case, insurance companies will be required to make all their costs publicly available so consumers can see how their premium dollars are spent.

The government granted insurance companies in seven states extra time to meet the requirements.  Insurers that serve states with more rural populations, for example, tend to have higher overhead costs and cannot meet the requirement as easily, according to Eric Fader, a New York health-care lawyer.  But the government decided that for all other states, enforcing the requirement wouldn't pose any risk to the market, and that the federal government didn’t “need to coddle an inefficient insurance company,” Fader said.

We lived in Louisiana for

We lived in Louisiana for decades. She doesn't listen to the people. She listens to the companies and lobbyists that give her money, like the oil industry companies and the insurance industry. She is on their side, not the people's side. She's proof that Democrats aren't any better than Republicans.

If we want to save our country, we can start by outlawing lobbying and corporate political contributions and put a limit on the amount of allowable contributions.

Agreed. If special interest

Agreed. If special interest money and corporate special interest money were abolished/made unacceptable in politics, then the politicians would HEAR the PEOPLE OF THE UNITED STATES OF AMERICA. For instance, you can not make me believe, that all employees making less than $100, 000/year in wages from Anthem Blue Cross really agree 100% with the executives (making millions/billions in salary and bonus money from Anthem.) Are these executives really doing both good for the employees and their health insurance customers when making their executive decisions? Wouldn't it make more sense to keep the money in the company (while ADEQUATELY and FAIRLY compensating said executives, based on expertise and legitimate useful work for the health insurance company?) That is how a FREE MARKET SYSTEM that the REPUBLICANS like to discuss, would and should be run in the business world minus the anti-trust protection that health insurance companies partake at this time. Special accomodations for an industry, especially an insurance industry is criminal! If health insurance premiums continue to rise in this economic environment, where more and more individuals find themselves uncovered by a job's health insurance policy (assuming that individual is even employed) at the same time that the executive salaries and bonus' rise at Anthem Blue Cross while coverage is greatly diminished is criminal!!! Where are the attorney generals in the State of California? This should be a no-brainer criminal investigation into the fraudulent coverage that an individual policy holder signed on for with Anthem Blue Cross in the 1990s and is trying to hang onto their coverage as we head into 2012. Why is Anthem increasing individual policy holders coverage by 22% as of May 1, 2012 while increasing every individuals deductible by $1000? Something criminal is going on and I believe continues to go on because politicians at every level must be in on the money exchanging hands! Until politicians and attorney generals in all 50 states look into what individual policy holders premiums were in 1995 and the affordable deductible at that time and COMPARE THESE AMOUNTS TO the premiums that are affordable in 2012 per month (almost a mortgage payment amount) for a $10,000 deductible per year is criminal!!! How does anyone expect an unfortunately unemployed individual to responsible and cover his/her family from a health insurance disaster?

Canada, also with a thriving

Canada, also with a thriving post-WWII economy, followed America's lead and went the health-insurance-as-an-employee-benefit route. But Canada's parliamentary system is far less hostile to minority parties than the American form of government, so despite skepticism in the other provinces, one of Canada's western provinces, which had what the Europeans call "social democrats" in power, eventually put in place a single-payer health system. When the other provinces saw how well this was working, they changed their minds and went that way themselves.

So now Canada is more like Europe in this respect than it is like the U.S. Also, you may note, Canada is on the metric system. It sees itself as just another country in the world, albeit with a very influential neighbor to the south. Any American who suggests that the U.S. should adopt the metric system would have been called a commie by Joe McCarthy, and these days, would get his phone tapped by the FBI as a probable terrorist.

I find it fascinating that

I find it fascinating that Blue Cross has ALL of congress in their pockets! If health insurance premiums came back to the 1999 or 2000 level, imagine all of the budget surplus that there would be in city, state, public school and federal retirement accounts!! Oh yeah, why are the multi-million dollar a year salaries of all congressional men and women not made to pay for their own sky-rocketing health insurance premiums, rather than all of us whom are under-employed in this economy, now not qualifying for company insurance due to cut-backs in the hours we work. Why are individual plans for Blue Cross going up by 22% on May 1st? I can bet that if the people in Congress were not getting sweet deals on their health insurance premiums, that are paid by the taxpayers so congress has no idea how much premiums are increasing (intentionally filling the Blue Cross administrators pockets!) I bet Boehner would be "coughing" mad about his high health insurance premium rates!! Why do we taxpayers have to pay the exceedingly ever-increasing health insurance premiums for a chain-smoker? Just wondering!!!

Stay good and angry with

Stay good and angry with insurance companies and politicians. Don't get fooled into the typical American trap of "divide and conquer'. That's exactly how corporations have managed to hide what they've been doing to unions and the middle class until people have FINALLY started to wake up. Leave smokers and other 99%ers alone and take your anger out on the 1% who deserve it.

Senator Landrieu for

Senator Landrieu for Louisiana sometimes mimic's Republicons. I will write her to tell her NO. In fact, I will contact my senators and tell them to vote NO.

I wonder why rural

I wonder why rural populations would have higher overhead costs? I never see anyone from the insurance companies in person, everything is done by mail or phone. Whether there's one billing person per hundred or per thousand is irrelevant to where the patients live. I would think that rural doctors can charge less because of lower overhead costs. Insurance companies don't cover my driving expenses to go to a hospital or clinic, whether it's 5 miles or 100 miles. And the pool of patients is just as big, just spread over a larger geographic area.

Is this just another excuse to raise premiums?

60% Broker fees... Geez, I

60% Broker fees... Geez, I wonder why our system is the most expensive on the planet... Europe and Canada run on 2% management... We run on 20% minimum... They have one person doing billing for every hundred we have here. They run single payer, we have a thousand competing companies with a thousand CEO's clamoring for bonuses to compensate their skills... Skills at lobbying congress and obfuscating the message to the electorate...
When the dollar is king, all manner of stupidity can be passed off as good for America... That is OUR responsibility to revisit what the pursuit of happiness actually means to us...

The history of healthcare in

The history of healthcare in the 20th century is instructive here. Prior to WWI, most Western (North American and European) countries were largely agricultural and medicine was both primitive (by today's standards--no antibiotics, for example) and localized. The local doctor made house calls and billed those who could afford to pay enough that, like some attorneys, he could serve other clients/patients "pro bono". Health insurance? What's that?

Medicine made great strides between 1900 and 1950, with many more specialties and treatment methods emerging. After WWII, most of Europe and Asia was devastated, and only governments could afford to provide rudimentary universal health care, needed to prevent epidemics etc. But North America had a booming economy, and health insurance benefits were one thing the labor unions and corporations could agree on as a way of avoiding strikes. Thence the great divide between single-payer in Europe and Asia, and "health insurance" in North America.

But what about Canada? Next post.

Right you are, Bosatsu. And

Right you are, Bosatsu. And the inconvenient truth that nationwide programs are most efficiently administered by the central government, not a patchwork of private for-profit and non-profit companies, is right up there with climate change and the metric system as things Americans, with our exceptionalist view of ourselves, are unwilling to accept. Of course, single-payer would be the quickest way to get the CEOs' hog snouts out of the trough and cut our health-care costs right away. But you've nailed why that won't happen here. It's the same reason we continue the insane war on drugs--too many vested interests in the status quo, all with lobbyists in DC, or actual agency heads who don't want a midlife career change.

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