House Republicans, unable to repeal President Obama's health care reform law outright, have decided to go after it piece by piece. If they are successful, what's likely to remain is the kind of reform the insurance industry dreamed of but never really thought could be the law of the land.
Although the Republican-controlled House passed legislation to repeal the Affordable Care Act several months ago, the Senate, controlled by Democrats, rejected it. Bills are now being considered in the House that would strip some of the most important consumer protections from the new law. If the bills' sponsors are successful, health insurers would be free to spend as little of our premium dollars on our health care as they want, and they would be able to continue setting lifetime limits on policies and cancel our coverage at the time we need it most -- when we get sick. Other important benefits to consumers would also disappear.
Because of my nearly 20 years of experience as an executive of two large insurance firms, I was asked to provide my perspective on the legislation at a hearing today of the House Energy and Commerce Subcommittee on Health.
One of the bills would eliminate a provision of the reform law that requires insurers to spend at least 80 percent of what we pay in premiums on actual medical care. The insurance industry tried without success to keep that provision out of the final bill, so they are solidly behind the effort to do away with it.
As I am explaining to the lawmakers, there is a single-minded focus among the big for-profit insurers on being able to show Wall Street and investors two things every three months: that the companies made more money during the most recent three months than during the same period a year earlier, and that the portion of each policyholder's premium devoted to covering medical expenses was less than it was the previous year.
When insurers release their quarterly earnings reports, investors and analysts look for two key figures: earnings per share, which is common to all companies; and the medical loss-ratio (MLR), which is unique to the health insurance industry. The MLR is the ratio between what an insurer actually pays out in claims and what it has left over to cover executive pay, underwriting, lobbying, sales, marketing, public relations, other administrative expenses, and, of course, profits.
A recent study conducted by the accounting firm PricewaterhouseCoopers revealed just how successful insurers have been in meeting Wall Street's MLR expectations. It found that the average MLR in the insurance industry has fallen from approximately 95 percent in 1993 to around 80 percent today. In many cases, it is much lower.
During my years in the industry, I came to know from personal experience that insurers almost always see sharp declines in their stock prices when they disclose that they spent more on medical care than investors expected. I remember vividly when Aetna's stock price fell more than 20 percent on the day it admitted that its first quarter MLR had increased from 77.9% to 79.4%.
If the industry's allies in Congress are not able to get rid of the MLR provision completely, they will try to at least make it even easier for companies to meet the requirement. One bill would exempt insurance agent and broker commissions from the calculation. Another would take that a step further by allowing insurers to exclude all sales commissions, including payments to salaried sales staff, from the formula.
Lobbyists for agents and brokers have joined the insurers in supporting the measures to gut or abolish the MLR provision. They have complained that insurers have been slashing broker commissions in order to comply with the law.
The reality, however, is that insurers had begun taking steps to reduce broker commissions even before the passage of the Affordable Care Act. Further, insurance firms are not being forced by the MLR provision to reduce commissions. There are other administrative expenses, like marketing and PR, that they could cut, but many of them have instead decided to reduce commissions to protect profits. None that I know of have trimmed the salaries of their CEOs and other top executives to meet the MLR requirements. They could, of course, but average executive compensation at the big insurers has gone up instead of down since the law was passed.
Even if legislation to exempt commissions were to be enacted, it would not likely be of much help to agents and brokers. There is no reason to believe that insurers would restore the commission reductions they have already made. Exempting commissions would only help insurers by making it easier for them to comply with the MLR provisions.
Another bill favored by insurers and sponsored by Republicans is similarly misguided. It would deny the Department of Health and Human Services the ability to enforce insurance reforms in regard to current plans, taking away important consumer protections. Among them: the prohibition on lifetime limits and the ban on rescissions -- a practice that lets insurers take away your coverage mid-year, usually after you've gotten sick.
That bill would also prohibit enforcement of the rule that allows young people to stay on their parents' insurance plans until age 26. This week's Census figures show that this provision has already helped 500,000 young people get insurance. Why would Congress vote to take away their coverage?
Because of the GOP's majority, there is a better-than-even chance that the House will pass these industry-friendly, anti-consumer bills. Our best hope is that the Senate will reject them, just as it did the earlier attempt to repeal the reform law entirely.
Follow Wendell Potter on Twitter: www.twitter.com/wendellpotter
http://www.youtube.com/watch?v=acc6Wn_BWlk
The opportunity to offer another "option" to us minions was summarily pulled off the table by the CHANGE CANDIDATE and our heroic herd of cats the Democrat majority. It is they who should be
the targets of your wrath. Vote for these bozos at your our peril.
The corporate feedback that was vomited forward hasn't even begun to demonstrate its sinister nature. "Best we could get"???
The entire world enjoys health security. You are feed for the beast.
http://www.youtube.com/watch?v=acc6Wn_BWlk
"Nongroup Policies CBO and JCT estimate that the average premium per person covered (including dependents) for new nongroup policies would be about 10 percent to 13 percent higher in 2016 than the average premium for nongroup coverage in that same year under current law. About half of those enrollees would receive government subsidies that would reduce their costs well below the premiums that would be charged for such policies under current law.
Average premiums per policy in the nongroup market in 2016 would be roughly $5,800 for single policies and $15,200 for family policies under the proposal, compared with roughly $5,500 for single policies and $13,100 for family policies under current law."
http://www.cbo.gov/ftpdocs/107xx/doc10781/11-30-premiums.pdf
Nongroup means individual or family plans; employer sponsored benefits won't change that much. The CBO goes on to say 57% would get government subsidies amounting to an reduction on premiums of 56-59%. The other 43% of nongroup will not only have the higher premiums, but also be paying taxes to help fund the subsidies.
I hope everyone is absolutely certain which % they will be.
AND AFFORDABLE CARE ACT (with amendments) as prepared by Office of the Legislative Counsel
FOR THE USE OF THE
U.S. HOUSE OF REPRESENTATIVES
http://docs.house.gov/energycommerce/ppacacon.pdf
It certainly appears comprehensive, including -
Sec. 10907. Excise tax on indoor tanning services in lieu of elective
cosmetic medical procedures øsubstitutes for section 9017 of PPACA¿ .... 922
Another point of view -
http://americanactionforum.org/sites/default/files/Case%20of%20the%20Premium%20Tax.pdf
I think I'll be spending this rainy afternoon doing a lot of reading. There are certain statements by Mr. Potter that sound like double speak to me. He complains proposed amendments would slash agent/broker commissions but then goes on to say insurance companies have already been doing that before the ACA ever passed.To say insurance must spend 80% on medical costs also says insurance is guaranteed 20% - so is there a limit on how much premium can be charged? I'm sure the truth is buried in there, somewhere.
How can the American public as a whole not be outraged at a government that continues to attempt (and succeed) to strip away consumer protections?
We fight wars all over the globe, yet we still can't find a solution to one of the largest problems facing so many American families, affordable access to health care/insurance....makes no sense.
I do appreciate Mr. Potter, maybe his writings will open eyes soon.
Elizabeth Warren has refused to 'shut up' and continues to expose the purposeful hurt being done to us by those who entered office under the guise of working for the American People. We can only hope she wins her bid for election.