From the Senate Bill: Section 2718 "BRINGING DOWN THE COST OF HEALTH CARE COVERAGE". ‘‘(1) REQUIREMENT TO PROVIDE VALUE FOR PREMIUM PAYMENTS.— ‘‘(A) REQUIREMENT.—Beginning not later than January 1, 2011, a health insurance issuer offering group or individual health insurance coverage (including a grandfathered health plan) shall, with respect to each plan year, provide an annual rebate to each enrollee under such coverage, on a pro rata basis, if the ratio of the amount of premium revenue expended by the issuer on costs described in paragraphs (1) and (2) of subsection (a) to the total amount of premium revenue (excluding Federal and State taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance under sections 1341, 1342, and 1343 of the Patient Protection and Affordable Care Act) for the plan year (except as provided in subparagraph (B)(ii)), is less than—
‘‘(i) with respect to a health insurance issuer offering coverage in the large group market,
85 percent, or such higher percentage as a State may by regulation determine; or
‘‘(ii) with respect to a health insurance issuer offering coverage in the small group market or
in the individual market, 80 percent, or such higher percentage as a State may by regulation determine, except that the Secretary may adjust such percentage with respect to a State if the Secretary determines that the application of such 80 percent may destabilize the individual market in such State.
What it means:The language is convulted but the result is simple,
insurance companies can no longer make money by ensuring people who don't make claims.Under the current business model of private insurers the goal is to recruit insurees who in all likelhood won't make claims, while denying those who are certain to either because of pre-existing conditions or simply by falling sick. The bill directly outlaws those practices but under 2718 they wouldn't have the desired effect anyway. Take the hypothetical case where your entire risk pool is made up of healthy young adults whose claims are mostly limited to broken bones from skiing or biking accidents. Under 2718 unless those claims across the risk pool don't add up to 80% or 85% depending the insurer has to rebate the extra premium. At the extreme the company would have to rebate the entire premium and so go out of business having no revenue to even pay employees. Under the new model the only ways to increase profits are one, to compete on the basis of volume, or two to reduce administrative costs, which is a 180 from the current model of hastling claimants into dropping coverage or simply finding excuses to rescind coverage.
Similarly 2718 limits or eliminates the utility of simply raising premiums because it would require a parallel increase of provider payments on an 85 to 15 ratio, otherwise the rebate provision would trigger. And while collusion between provider and insurer can't be excluded the benefits would flow more than 5 to 1 to the provider while the price differential with other plans falls entirely on the insurer. The same effect occurs by eliminating a category of coverage, even if you didn't fall afoul of the Acceptable Benefits Package requirements once again you risk triggering the rebate provision.
The words are not used in the bill but the result is nearly automatic cost controls. And enforcement is relatively easy,
most of the information needed to calculate MLR is readily available in SEC filings and IRS returns, you don't need HHS auditors rummaging around in the records, the SEC, the FBI and the IRS are already on the job.
This language is not in the House Bill, at least not with the same effect, and we can expect that insurance companies will start working on the usual suspects to kill the bill on final
(the language is still in the bill as of 3/13/10). Which in my mind is reason to
just get this bill signed to nail 2718 into law.Because on its own it has many of the same benefits on the overall system that the Public Option was supposed to deliver.http://www.angrybearblog.com/2009/12/medical-loss-ratio-revisited-cost-and.htmlYou can go to the article link and read the comments, as that might answer some of your questions
in reference to loopholes ect.....
The author also has the last comment on that blog:
"For those of us who believe that given an open playing field a Public Option can out compete for-profit insures this provision is the Golden Bullet to ultimately kill the Beast that keeps 50 million people uninsured at a societal cost far greater than that of other developed countries.
At times I worried about pointing this out lest opponents of health care reform focus on killing it, but figured that AHIP was all over it anyhow. And indeed they seem to have watered it down to nothingness over the summer only to have it come back to life. There was some reporting that their early elation about getting the individual mandate through without the PO was tempered when they found out this had crept back in the bill and gotten past the Conservadems. Which in my view is the strongest reason for the Democrats to swallow hard, pass this version of the bill before Nelson and Lieberman get instructions to find some new pretext to kill the bill. Take the money and run."Maybe that's why Nancy is smiling so much these days!...... :shrug:
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