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The insurance industry is going directly to the White House in its latest attempt to evade a key portion of the health reform law that would force them to operate more efficiently. But instead of making the argument directly, the industry is speaking through state insurance commissioners that are either friendly to insurance companies or cowed by insurers' threats to leave a state market.

The insurance commissioners of Maine and Iowa were at the White House meeting Wednesday and said they might lose all but one company in the individual insurance market if they were held to the 80% rule, which would require insurers to spend at least 80% of revenue on medical care. They're cowed by brute market power. The odd man out was Kevin McCarty, the Florida Insurance Commissioner. Florida is a huge market, with several major companies, and no particular reason to fear wholesale departures from its market. But he was a chief voice calling for a "phase-in" that would let insurers off the hook.

The National Association of Insurance Commissioners hasn't endorsed any blanket exemption from the 80% rule. But there's a fight still brewing at the NAIC about the hefty payments that insurance brokers get for selling individual health insurance, and a compromise reached at the NAIC's summer meeting in August left the door ajar for a deal that could let the broker fees be deducted from premiums.

If those payments (up to 20% of the first-year premium upfront and 5% a year after that) were included in the formula for the "medical care ratio," it would make a joke of the 80% requirement. If they're not included, insurance companies will have to actually be more efficient and broker payments might get smaller. The insurance brokers, however, are quietly backed by the big insurance companies, who need them to draw in business and later to "guide" customers through insanely complicated policies so they don't go directly to the company.

Now, with the Florida insurance commissioner in the lead, they're trying to get the White House and the Department of Health and Human Services to do the dirty work. 

It's not a big deal publicly, like the major insurance companies' announcement that they will no longer sell individual policies for children because they can no longer exclude children with health problems. The medical care ratio, also known a the "medical loss ratio" is harder to grasp and not part of the public conversation. It's really a Wall Street metric--the lower the medical loss ratio, the more investors like the stock.

CQ.com (subscription barrier), said 32 state commissioners were at the lightly reported White House meeting. There was no mention of dissenting voices, so it looks like the members of the NAIC are enabling insurers to keep whacking consumers with 20% premium increases and increasingly worthless policies, at least until 2014. The insurers have powerful lobbies in every state Legislature, and the commissioners themselves partake of a revolving door to better-paying jobs in the industry.

From the CW story:

Iowa Insurance Commissioner Susan E. Voss said she sent a waiver
letter to the Department of Health and Human Services (HHS) on Tuesday
asking that the MLR be phased in through 2014 in her state, where there
is a dominant health insurer and a small cluster of other providers in
the individual market. Without more time for small companies to meet
the standard, “it’s going to be like 1-800-Blue Cross Blue Shield in
Iowa,” Voss said.

Florida Insurance Commissioner Kevin McCarty said he appreciated the
president’s words because “we can’t put this all into place
immediately” without potentially disrupting the market. “If our goal is
to minimize disruption before guaranteed issue in 2014, then a way to
do that is to do some kind of phase-in,” he said, referring to the
point in 2014 when health insurers cannot deny applicants if they have
pre-existing conditions.

Administration officials “don’t like the word phase-in” and want
concrete evidence of what disruption in the marketplace would be,
McCarty said. He said he had a conversation with Jay Angoff, head of
the Office of Consumer Information and Insurance Oversight, about
Florida’s concerns.

The hourlong White House meeting included commissioners from 32
states, two territories and the District of Columbia. HHS Secretary
Kathleen Sebelius and Labor Secretary Hilda L. Solis were in attendance, and the president arrived about halfway through, commissioners said.

Frankly, it sounds like the White House will cave if the Florida commissioner puts together any kind of numbers proving possible "market disruption," dubious or not. I hope I'm wrong.