Lost in the ongoing election postmortem was this report yesterday from the Congressional Budget Office that a bill being pushed by the insurance industry and its salespeople to eliminate one of the strongest consumer protections in the health reform law would increase the deficit by more than $1 billion and raise health insurance costs for consumers.
How the bill fares – in the lame duck session starting next week or in the new Congress –will tell us whether the GOP’s hopes to deal Obamacare a death by a thousand blows went the way of Mitt Romney Tuesday.
The rule in question forces health insurance companies to become more efficient by requiring them to spend at least 80% of our premiums on medical care, not bureaucracy, salaries and profits. Those health insurance companies that fail and don’t meet the standards have to send rebate checks to consumers to make up the difference. $1.1 billion in rebate checks were sent out by insurers this year alone.
The health insurance lobby isn’t too happy about refunding consumers. They’ve laid on the lobbying in Congress for a bill to weaken the so-called "medical loss ratio" rule and let them spend more money on overhead and less on actual health care.
One part of that overhead is commissions to brokers and agents – the people who sell insurance. Those commissions can be up to 20% or more of the annual premium for the initial sale. Health insurers are threatening to take the cost of the rebates out of broker pay.
The brokers don't want to get less, and they’ve joined the insurers’ lobby machine to protect their paychecks. But they don’t need protecting. As my colleague Judy Dugan pointed out in her blog a few months ago:
With the inexorable rise of health insurance premiums, they've gotten fat as commissions rose in tandem with double-digit price hikes. The result was a 2800% income increase over a decade. So even if they don't get 20% as insurance companies become more efficient, they'll still make a living.
However, the brokers have a plan to do away with all that efficiency, in a way that will deprive consumers of their rebates. There are bills in the House (HR 1206 by Rogers ) and Senate (SB 2288 by Landrieu) to simply remove broker commissions from the calculation of health insurance overhead, as if by magic.
So if insurance company A is paying an average of 5% a year on broker commissions, the 5% just vanishes from the 20% allowance for overhead. No insurance company will ever have to pay a rebate again.
As the CBO report confirms, if the broker bills to gut the 80-20 rule passes, we can kiss consumer rebates and increased insurer efficiency goodbye. That will mean higher health care costs for individuals and employers, and increased costs for the government as well because it will be subsidizing higher premiums for eligible consumers on the new state health exchanges.
This may be an early test of a new Congress and the White House’s commitment to preserving the key consumer protections of the health reform law against continuing and unrelenting attack by the insurance industry.