How strong will this 85% medical loss ratio cap on insurance companies be?

[andym]

This looked interesting to me:
--based on the definition it seems that 85% will not be a welcome number for the insurers.

From http://energycommerce.house.gov/Press_111/health_care/hr3962_Section_by_Section.pdf

Sec. 102. Ensuring value and lower premiums. Amends the Public Health Service Act to require health
insurance issuers in the small and large group market to meet a medical loss ratio of not less than 85%, effective
for plan years beginning January 1, 2010. Directs the Secretary to require that plans in the individual market
also meet a medical loss ratio of not less than 85% so long as it does not destabilize the existing individual
market. If plans exceed that limit, rebates to enrollees are required . In determining the methodology for the
medical loss ratio, the Secretary is to design it to ensure adequate participation by issuers, competition in the
market, and value for consumers.

What are the loopholes? ("destabiilize the existing market?") How can it be made stronger?

Here is a definition of medical loss ratio from http://www.washingtonpost.com/wp-dyn/content/article/2006/04/29/AR2006042900256.html

"In health insurance, the fraction of revenue from a plan's premiums that goes to pay for medical services.

· The portion of health plan revenue that does not cover administrative or marketing expenses, taxes and profits.

· Viewed from different angles, a measure of the profitability of a health insurer, the quality of health care enjoyed by its customers, the competitiveness of pricing in the marketplace or the efficiency of its non-medical activities.

· A number that traditionally ranges from 75 percent for the most profitable and efficient plans to more than 100 percent for money-losing plans.

· For Aetna, a figure that increased last quarter from 74.6 to 79.4, causing a 20 percent plunge in its share price when it was announced.

· According to analysts, the best indicator of a future turn in the health-insurance industry's profit cycle. "

[Doctor_J]

1. The fact that they're allowed to use "medical loss"

to describe a contractually mandated payment for HEALTH CARE is a very bad omen.

[andym]

2. Isn't that just standard terminology in health care? nt.

[eridani]

12. As matter of fact no. Not in CIVILIZED countries, anyway n/t

[TreasonousBastard]

8. Another bad omen is people who know nothing about insurance...

talking about it.

"Loss ratio" is an almost ancient insurance term, and is used by all of them, and their underwriters, stockholders, regulators, analysts and actuaries and anyone else who cares to assess ratemaking, profitability, and just about everything else.

"Medical loss ratio" is simply the loss ratio of the health line if it is a multiline company with other insurance business.

[eridani]

13. Fuck insurance. I want to pay for healt care, and that only

Plus Medicare level administrative costs of 3%.

[TreasonousBastard]

15. I want to win the lottery and take off with Sandra Bullock, but it...

ain't gonna happen.

The difference is, though, that winning the lottery and taking off with Sandra Bullock would be a good thing.

Medicare, in case you haven't noticed, has a large number of confusing parts to it, doesn't cover everything, has copays and deductibles fopr what it does cover, and is responsible for a lot of excessive spending where it does cover because of limited oversight and bureaucratic rules.

(And don't start with the subsidies it enjoys to pay for what it does and to keep that phony expense ratio so low.)

[eridani]

16. Then letting more people in would be a major impetus to needed changes

And as long as we are not getting something, compare Medicare to the outright theft at gunpoint to make us pay for mandated private insurance.

[TreasonousBastard]

17. Think this through for a minute...

somebody has to pay the providers-- Medicare, Medicaid, insurance, your own cash, or someone else.

Whoever pays has to get the money from somewhere. That would be from you and everyone else covered, or from the taxpayers.

So, if your payments (i.e. premiums) don't end up paying all your expenses, someone else's will.

Who will that someone else be?

The whole point of any pooling system, public or private, is that the money taken into the pool has to pay the expenses. You will have to pay for coverage no matter who it's from.

[eridani]

18. Yes, but we don't have to pay useless shitstain interrmediaries to withhold care

The providers will have lower costs, as Medicare has only 3% overhead as opposed to 30% for private insurance. I have recommended in other posts that some of the proposed Medicare reforms (moving away from fee for service and other things) be stripped from the current legislation and passed separately.

[TreasonousBastard]

19. Beware that 3% number...

and that higher number for the insurance companies.

Medicare counts its cost of capital at $0, while all private companies have to include their borrowing costs in their balance sheets. Medicare also has almost no enrollment or collection costs, since Social Security takes care of the enrollment, and the IRS takes care of paying into the plan. And insurance companies pay taxes (often part of that expense ratio) while Medicare IS a tax. If you took the free rent, shared phone bills, shared payroll and benefit costs and other goodies conveniently left out of Medicare's budget, expenses would be still be advantageous for Medicare, but a lot closer.

And, insurance company expense ratios are flexible, with large plans covering thousands of employees having a low ratio comparable to Medicare while smaller plans will be more expensive. Smaller plans not only have more enrollment expense, they often have to pay commissions to agents or brokers who set them up.

While much is made of insurance companies denying coverage, not much is made of them being much better at catching fraud than Medicare is. They also usually don't have the absurdly complex different parts of coverage that Medicare has. Some parts which, of course, contract with insurance companies.

So, what we're back to is not putting all the blame on the big bad insurance companies, but dealing with a system that manages to come up with million dollar cancer treatments and $10,000 days in the hospital.

[eridani]

20. There are 19,000+ different private insurance plans in Chicago alone

Medicare has A, B, C and D, with the stupid "market" Advantage plans which make things more complex promoted by private insurance. Way less complex. That Medicare contracts paperpushing is irrelevant--they don't do underwriting or advertising or recission. The sharing arrangements with other government agencies are an argument for, not against, Medicare.

The problem with cost controls is that Medicare and private insurance use the same protocol, namely the equivalent of controlling the movement of a herd of cows by hiring a bunch of cowboys with reins to each individual cow. Single payer, as well as regulated private insurance does the equivalent of putting a fence around the them and letting them move freely within. With global budgeting, providers who cheat take money directly out of their colleagues' pockets. The colleagues notice and object. I'm only supporting buy-in to Medicare because we can't get national single payer right now.

[TreasonousBastard]

21. And you're never getting single payer here...

whatever you mean by "single payer."

A socialized system like Britain is completely out of the question-- just ain't never gonna happen in the US. Imagine getting Congress to plan it and then 800,000 doctors with their hospitals and gastro clinics and whatever businesses they've built to agree to completely redo the medical business models they're working under.

Ain't gonna happen, and really hasn't happened anywhere but Merrie Olde England. And the Brits essentially expanded a wartime emergency medical system, so they didn't really upset much when they came up with the National Health. More to the point of what we could do is study the French and German models. Maybe even the Japanese. They balance fee-for-service with a tightly regulated insurance market and get better results than we do.

(Actually, the Czechs and Bulgarians are pushing us as far as results go.)

But, nothing good is going to happen until we find some way to make a few small changes in those business models to get fewer newly minted MDs chasing after dermitology residencies and setting up shop in Houston or NY to pay their half-million dollar student loans.

Primary care, the good ol' family doctor, is in short supply in most of the country, and not making much of a living anywhere.

[eridani]

25. A single payer system was implemented in Taiwan within a few years in the 90s

No US health care activist has ever advocated a Beveridge system--just the Douglas system where the government pays the bills. Canada uses global budgeting even though most providers are in private practice.

[vaberella]

30. Are you just randomly throwing things out there and seeing what sticks?

Is Taiwan the exact same country as the United States, with the exact same medical system we have now going on in th 90s?! Don't just pick country and use it as a likely example because they were able to do something that you want implemented. It doesn't work that way. In actuality, I'd like to know if Taiwan has an SS and Medicare/Medicaid before the 90s change. We're wholly unique and there are too many problems with medicare to throw in 250 million more people into a system. It's complex and problematic. And the thought of doing reform in such a system at the same time with an influx of 5 times as many people would ensure major FAIL and you'd ask for Dems to just not bother existing because of the massive failure. However, if you're willing to wait----the amount of reform and change with proper change and structural stability could be a 5-10 year wait---without any certainity if it would be a success in the US.

[eridani]

31. Throwing more people into Medicare would be a big motivation to solve Medicare problems

--which, as noted, if we had the price controls that all other countries had, wouldn't be having problems.

Starting a whole new exchange system from scratch, with its basic foundational principle being that some deserve good health care and others are disposable human garbage who do not, is more doable that gradually reforming and expanding an already existing (and very popular) systema? You're kidding, right? You want easy to implement, and you approve of a bunch of claptrap with four different levels of plans from hundreds of private companies? And a whole new bureaucracy to monitor all the bullshit?

The proposed exchange is worthless in solving the basic problem of cost control. The only way that countries working through private insurance have cost control is that it is directly imposed by governments, and Congress is absolutely refusing to do this.

And it isn't just the 55-64 demographic which is disposable human garbage. That there even is such a thing as a basic plan, with more benefits in higher level plans available only to those who have more money, labels the bottom-dwellers as having no worth.

[DLnyc]

24. Okay, I'm thinking this through.

After removing large profit margins, excessive CEO compensation, excessive administration costs required to fight off legitimate claims, excessive costs on doctors dealing with a bewildering array of intentionally confusing insurance company requirements, advertising costs, lobbying costs, it seems to me that we could have a 'pooling system' that charges a HELL of lot less if we had single payer or at least a widely available public option.

Of course I'm just an ordinary schmuck, not an insurance expert. But, even though I might not know the ins and out of the history of insurance, I think a couple of visits to any doctor's office can make clear even to a moron like me that there are huge amounts of time and money being spent on things that have nothing to do with actual medical care.

[Bluenorthwest]

22. You are aware that Medicare's beneficiary satisfaction rate is

far higher than that of any private insurer don't you? This means that people who have Medicare, most of whom have had a lifetime of private plans already, are MORE satisfied with Medicare than they were with private insurance.
What is your experience with Medicare? Any at all?

[Doctor_J]

23. Medical loss = any money the insurance company must pay for medical care

basically it's what's left after these murderers have taken every last penny of profit from my premiums.

[lumberjack_jeff]

3. That's cool. I hadn't seen that provision. K&R

[SpartanDem]

4. That'll depend on the HHS Secretary

it will up to her to issue the federal rule on how it will be calculated.

‘‘(b) IMPLEMENTATION.—The Secretary shall establish a uniform definition of medical loss ratio and methodology for determining how to calculate it based on the average medical loss ratio in a health insurance issuer’s book of business for the small and large group market.

[John Q. Citizen]

5. Is there any money appropriated for inspectors to audit the millions and millions of

customer histories to determine if the insurance companies are ripping people off?

I wonder how many inspectors they would need to do that.

And how would they go about securing refunds when warranted?

[andym]

6. I don't think so-- although it's unclear

But they'll still be in a quandary with respect to rebates and the 85% cap, because they need to report accurate medical risk ratios to their stockholders (via SEC regulation). So they can't just fib.

They don't really describe how much regulation they will be funding. From the summary:

Sec. 242. Duties and authority of Commissioner. The Health Choices Commissioner carries out functions
including: establishment of qualified plan standards, establishment and operation of the Health Insurance
Exchange, administration of affordability credits, and additional functions as laid out within the bill. The
Commissioner can collect data necessary to carry out his or her duties and to promote quality and value and
address disparities in health care. Such information can also be shared with HHS. The Commissioner also has
oversight and enforcement authority including the authority to impose sanctions and suspend enrollment of a
plan. This authority requires the Commissioner to coordinate with the Department of HHS, the Department of
Labor and State insurance regulators.

Sec. 243. Consultation and coordination. Requires the Health Choices Commissioner to consult with other
regulatory bodies and state and federal agencies in carrying out his or her duties and to ensure appropriate
oversight and enforcement.

Sec. 244. Health Insurance Ombudsman. Establishes a Qualified Health Benefits Plan Ombudsman to assist
individuals in navigating the new health reform system and report to Congress on recommendations for
improvements in administration of the program.

[SpartanDem]

7. No, only the regulator is established

[TreasonousBastard]

9. Nothing in there about how the companies would deal with reserves, or...

any reinsurance they might have.

I don't know health claims are reserved, but it's pretty much standard practice in other lines to set up a a file with the anticipated claim payout. Loss ratios are calculated largely on reserves set up. This is very highly regulated by the states right now, but who knows what could change under the new law.

Reinsurance is another question-- again, I don't know how health insurers handle it, and they might keep most or all of the risk themselves, but it's common practice in other lines to lay off risk so the company doesn't go bankrupt with a huge catastrophe or series of huge claims. Reinsurance doesn't affect loss ratio, but it does affect profitability.

[ind_thinker2]

10. unclear, hhs has to review along with ins compaines

[Better Believe It]

11. They can't even monitor and control Wall Street! Not that they are trying very hard.

[eridani]

14. Irrelevant if they retain the power to turn down claims n/t

[slipslidingaway]

26. Health Care Reform Bills - Does Actuarial Value Trump Medical Loss Ratio?

thread and links here
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=6916987&mesg_id=6916987

"...But limiting insurers’ administrative expenses is not necessarily the most beneficial strategy for insureds. Ensuring a high actuarial value of benefits provided would be best. The Congressional Research Service earlier this year reviewed “actuarial value” issues. The actuarial value provides an estimate of the proportion of health care expenses a plan likely will pay. As the economy has deteriorated, so has the actuarial value of employer-sponsored health insurance. Individuals covered by employer-sponsored health insurance these days get lower actuarial values and less protection..."


"...If there is a cap on out-of-pocket spending, then why should the precise actuarial value make difference? Simply, the lower the actuarial value, the greater the likelihood that the patient will have to spend the full amount up to the cap. Thus more individuals will be negatively impacted. Also, the amount of the cap makes a very big difference. The proposed caps on out-of-pocket spending, when added to the patient’s share of the premium, create a financial hardship for most low and middle income individuals and families..."

[andym]

27. Sounds like an obvious idea for an amendment to the bill

substitute actuarial value for medical loss ratio.

[slipslidingaway]

28. Many people have seen more costs shifted to them, especially over the last...

few years as the actuarial value has declined, but more people will have insurance.

:shrug:

Wendell Potter in his interview with Bill Moyers stated that during the Clinton HC debate the medical loss ratio was closer to 95% and has steadily deteriorated since.

http://www.pbs.org/moyers/journal/07102009/transcript2.html

[bornskeptic]

32. I don't think that helps.

If you keep the out of pocket expenses the same, there are only two ways you can raise the actuarial value. Either you raise the premium or you raise the medical loss ratio. That's pretty basic arithmetic.So if you thenallow the insurers to keep the same low medical loss ratio, you're just requiring people to buy more expensive policies, but requiring a higher medical loss ratio will ensure that policyholders get more value for their money.

[slipslidingaway]

33. Or we could dump the for profit insurance companies for a basic standard...

of care, many other countries have figured out have to offer health care without bankrupting their citizens.

:shrug:

[grantcart]

29. This thread may be the single best thread to explain why we need single payer

Just look at all the creative bullshit that we go through to try and keep the American health system intact.

[slipslidingaway]

35. Agreed! n/t

[Better Believe It]

34. It will be almost as strong as the public option. Oh boy!

[slipslidingaway]

36. Wendell Potter said the average medical loss ratio was 95% in the early 90's....

and according to this article the average is now 85.2%.

Also mentioned in the second article is shrinking enrollment and they know when the baby boomers begin retiring in the next couples of years it will get worse - but now we'll have mandates.

:shrug:

http://healthcare-legislation.blogspot.com/2009/11/does-actuarial-value-trump-medical-loss.html

"...The American Medical News on August 24 reported that, for the second quarter of this year, the average medical loss ratio of the largest publicly traded health plans was 85.2%, but ranged from 82.9% to 86.8%..."


http://www.ama-assn.org/amednews/2009/08/24/bisb0824.htm

"...After years when that ratio stayed around 80%, Aetna, Health Net, Cigna and Coventry all have seen it jump above 86%.

Part of the problem is shrinking membership. Aetna, Cigna, Coventry Health Care, Health Net, Humana, WellPoint and United covered a collective 117.7 million people during the second quarter of 2008. That number was about 2 million less for the same period this year..."



http://www.pbs.org/moyers/journal/07102009/transcript2.html

"WENDELL POTTER: Well, there's a measure of profitability that investors look to, and it's called a medical loss ratio. And it's unique to the health insurance industry. And by medical loss ratio, I mean that it's a measure that tells investors or anyone else how much of a premium dollar is used by the insurance company to actually pay medical claims. And that has been shrinking, over the years, since the industry's been dominated by, or become dominated by for-profit insurance companies. Back in the early '90s, or back during the time that the Clinton plan was being debated, 95 cents out of every dollar was sent, you know, on average was used by the insurance companies to pay claims. Last year, it was down to just slightly above 80 percent.

So, investors want that to keep shrinking. And if they see that an insurance company has not done what they think meets their expectations with the medical loss ratio, they'll punish them. Investors will start leaving in droves..."