A consumer group warned in a letter to U.S. Health and Human Services Secretary Kathleen Sebelius that health insurers “cannot be trusted” when lobbying over provisions of the new federal health reform law.
Consumer Watchdog, which bills itself as a nonpartisan group, said investigations into California rate increases sought by WellPoint and Aetna suggest that health insurers are looking for loopholes. Both rate requests were withdrawn after state officials uncovered mathematical errors.
“The insurance industry is lobbying now for loopholes in regulatory language that would make it unnecessary for insurers to make mathematical ‘errors’ in order to meet the law’s requirement that they spend 80% to 85% of premium dollars on health care,” the letter to Sebelius suggests.
Judy Dugan, research director from Consumer Watchdog, went further, saying, “The California rate scandal shows that insurers cannot be trusted with a hand calculator, much less the language of health regulation.”
The group is arguing what should be considered within the medical loss ratio, the amount health insurers have to spend on health care versus administrative costs. Under the federal health reform law, passed in March, insurers have to meet the requirement of either 80% or 85% spent on medical costs, depending on the group’s size.
As regulations are written to enforce the new patient care ratio law, the industry seeks to reclassify administrative functions as “health quality improvements,” and to exempt many health policies sold to individuals from the spending limits, Consumer Watchdog said in the letter to Sebelius.
“The administration has to push back hard on these early regulations, or risk losing control of the whole health reform process,” said Carmen Balber, Washington director for Consumer Watchdog, in a statement. “If the insurers win these early battles, they will bulldoze every attempt in the new law to cut health costs and provide better health, even as all Americans are required to show proof that they are insured.”
The group said the MLR is “at serious risk. If insurers get away with bully tactics on this early implementation, the rest of the health reform law will be increasingly difficult to implement in ways that curb costs and protect consumers,” the letter states.
“The insurance industry’s proposed redefinitions of ‘patient care,’ ‘administrative costs’ and allowable tax exclusions from the calculation would pad the amount they appear to be spending on patient care by amounts that would not require any changes in their business model. They seek to remove any demand that would make the industry more efficient,” Consumer Watchdog said in the letter.
The National Association of Insurance Commissioners (NAIC) was tasked in the federal reform law with helping Sebelius determine appropriate MLR numbers, an effort it was supposed to complete by June 1. However, the NAIC said its work on MLRs would be delayed until later this summer.
Consumer Watchdog fears the role the NAIC will play.
“The NAIC has detailed knowledge of insurance but it is also closely tied to the insurance industry,” said Dugan. “Its president and board are drawn from state insurance commissioners, who often come from the insurance industry and whose common ‘next job’ is in the executive suites of the insurance industry. It is not a recipe for tough regulation of the industry.”
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