Why insurers care about the medical-loss ratio

[ProSense]

Why insurers care about the medical-loss ratio

by Andrew Van Dam

The Wall Street Journal’s Avery Johnson explains the significance of the “medical-loss ratio,” a single metric within the reform bill that holds great significance for the insurance industry.

The ratio, known to wonks as the MLR, signifies the percentage of premiums insurers use for medical costs versus the amount that goes to paying administrative overhead. For individual and small-business plans, it’s set at 85 percent medical to 15 percent administrative. For larger businesses, the magic medical number is 80. Those who don’t meet the threshold would be forced to pay rebates to customers.

At present, the key issue seems to be subsidiaries. Major insurers have hundreds of them each, and while the insurer could meet the requirements if all subsidiaries were averaged together, they won’t be able to hit the numbers at every single subsidiary. Current draft documents, Johnson reports, seem to imply that each subsidiary would be judged separately, a practice which insurers say might force them to stop providing insurance in certain high-risk areas.

Applying uniform numbers to the segmented, fragmented insurance industry could prove tricky. Johnson looked at the numbers.

UnitedHealth, for instance, has about 392 subsidiaries, according to Goldman Sachs health-care analyst Matthew Borsch. Its average MLR for individual policies is 69%, dragged down by a 63% ratio at its dominant Golden Rule subsidiary, according to a report by Goldman Sachs that examined state insurance filings. The Minnetonka, Minn., insurer could owe about $280 million in rebates in 2012, Mr. Borsch estimates, based on his reading of the methodology in the health care law.

The rules will be set by the National Association of Insurance Commissioners, a coalition of state insurance regulators. They’re hoping to have recommendations ready for HHS by the end of this month.

Maine Says New U.S. Rule Could Hurt Health Insurance Market

Maine's insurance regulator, concerned about disruption to the state's market for individual policies, has asked the Obama administration for a waiver of a minimum medical-spending requirement that the nation's new health overhaul will place on insurers selling such coverage.

The request reflects the complex nature of a key piece of the overhaul, requirements that insurers by next year spend at least a certain percentage of premium dollars on patient care, in a measure known as the medical loss ratio, or MLR.

As regulators continue to hammer out the details of how the law will be implemented, Maine's superintendent of insurance, Mila Kofman, wrote to U.S. Health and Human Services Secretary Kathleen Sebelius earlier this month seeking a waiver of the 80% minimum MLR requirement for individual health insurance policies in that state until 2014.

The overhaul goes more fully into effect in 2014, when Americans without group coverage will be able to buy individual policies through state exchanges regardless of pre-existing conditions. Regulators and the industry have expressed concern that until then, the new spending requirements could force some insurers to exit markets, causing disruption for patients.

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[iamjoy]

1. How Insurers Will Cope

I do not expect that they will actually reduce what they pay their senior management folks and CEOs. Nope. IF they don't find some fancy accounting tricks, they will save administrative costs by firing the front-line people. That means if you have to call your insurance company to find out if your pre-authorization has been approved, or what the status of a claim is, etc you will have fewer hours in which to contact them (because call center hours will be reduced) and longer hold times. They will also have fewer people processing claims, meaning you may get a bill from the medical provider not because the insurance company denied the claim, but because they haven't paid it yet.

Or maybe I'm just cynical.

[ProSense]

2. So you think

they'll reduce customer service in an environment where more choices become available to consumers?

Sounds like a formula for going out of business.

[iamjoy]

3. Not If Everybody Does It

Besides, they will have plenty of sales staff, just not as many representatives to help existing customers.

[Mimosa]

6. Exactly how BC/BS does it

And they want everybody to go online with their problems.

Prosense, this Health insurance bill was pretty much dictated by Wellpoint, BC/BS and others.

[SunsetDreams]

7. How did they dictate it?

[Mimosa]

8. Check link below

I could post dozens of links.

http://articles.latimes.com/2009/jul/23/nation/na-healthcare-talks23

[SunsetDreams]

10. That still does not support dictation of the Bill.

[Lasher]

11. The revolving door spins faster on healthcare reform

Thursday, Jul 15, 2010 14:46 ET

By Glenn Greenwald

Beginning in 2001, Liz Fowler was the Chief Counsel for the Senate Finance Committee in charge of health and entitlement issues, i.e., legislation that primarily affected the healthcare industry. As her own biography boasts:

In this capacity, she was responsible for overseeing health policy issues within the Committee's jurisdiction, including Medicare, Medicaid, SCHIP, health tax issues and initiatives to provide health coverage for the uninsured. She played a key role in the 2003 Medicare Prescription Drug, Improvement and Modernization Act (MMA).

Her work in that government health policy position was apparently quite pleasing to the healthcare industry because, in 2006, she was hired by the health insurance giant WellPoint to serve as its Vice President for Public Policy and External Affairs -- in other words, overseeing WellPoint's lobbying and other government-influencing activities. Then, in 2008, once it was likely that there would be a Democratic President and thus a new, massive healthcare bill enacted, Fowler left WellPoint and returned to the Senate, as top aide to Democratic Sen. Max Baucus, the Senate Finance Committee Chairman who would oversee the drafting of the healthcare bill (Baucus's previous top healthcare aide, Michelle Easton, a former PhRMA official, left to become a lobbyist for the healthcare industry). Now, as David Sirota noted last night, Fowler has a brand new job, as reported by The Billings Gazette:

Liz Fowler, a key staffer for U.S. Sen. Max Baucus who helped draft the federal health reform bill enacted in March, is joining the Obama administration to help implement the new law.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x548320

Baucus Thanks Wellpoint VP Liz Fowler for Writing Health Care Bill

Monday March 29, 2010

Not a surprise really that upon passage of the health care bill, Max Baucus would openly thank Liz Fowler, the former Wellpoint VP, for writing it:

"I wish to single out one person, and that one person is sitting next to me. Her name is Liz Fowler. Liz Fowler is my chief health counsel. Liz Fowler has put my health care team together. Liz Fowler worked for me many years ago, left for the private sector, and then came back when she realized she could be there at the creation of health care reform because she wanted that to be, in a certain sense, her profession lifetime goal. She put together the White Paper last November–2008–the 87-page document which became the basis, the foundation, the blueprint from which almost all health care measures in all bills on both sides of the aisle came. She is an amazing person. She is a lawyer; she is a Ph.D. She is just so decent. She is always smiling, she is always working, always available to help any Senator, any staff. I thank Liz from the bottom of my heart. In many ways, she typifies, she represents all of the people who have worked so hard to make this bill such a great accomplishment."

http://fdlaction.firedoglake.com/2010/03/29/baucus-thanks-wellpoint-vp-liz-fowler-for-writing-health-care-bill/

[Zoeisright]

4. Like I give a flying fuck about insurance companies. They're bloodsuckers.

Making money off illness, misery, and death is cruel. Why no one has ever 'gone postal' in an insurance company is beyond me. They literally kill people every single day with their cruel and heartless policies and decisions.

[area51]

9. +1

Each day, 273 people die due to lack of health care in the U.S.

We need single-payer health care, not a welfare bailout for the serial-killer insurance agencies.

[Moochy]

5. working for a livin

[IndianaGreen]

12. Are we now supposed to defend the profits of the health insurance industry?

I would love to see what happens when they try to put that as a plank in the 2012 Democratic platform.

[ProSense]

13. Who said you had to care about insurance companies' MLRs?

Insurance companies obviously care. The health care law moves it up to 85 percent.

[Catshrink]

14. Hey Arne Duncan deems that schools have to meet certain arbitrary targets

regardless of the school's population (special education, ELL, economic challenges), I don't know why insurance companies shouldn't have performance requirements.

[proud2BlibKansan]

15. Perfect analogy

I might borrow that.

[ProSense]

16. They do:

What functions will Exchanges perform?

The law requires that, at a minimum, Exchanges will:

• certify whether health plans are qualified to be offered in the Exchange, including examining their premium increases;
  
  
• require of plans and make public disclosure of the following information in plain language: claims payment policies and practices; periodic financial disclosures; data on enrollment, denied claims, and rating practices; information on cost sharing and payments for out-of-network coverage; and enrollee and participant rights;
  
  
• require qualified health plans to make available timely information about the amount of cost sharing for specific items or services;
  
  
• operate a toll-free telephone assistance hotline;
  
  
• maintain an Internet website where enrollees can obtain standardized comparative information about the health plans;
  
  
• assign a rating to each health plan in the Exchange based on the relative quality and price of their benefits;
  
  
• use a uniform enrollment form and a standardized format for presenting health benefits plan options;
  
  
• inform people about the eligibility requirements for the Medicaid, CHIP or other State or local public programs and coordinate enrollment procedures with them;
  
  
• make available an electronic calculator to determine the actual cost of coverage after any premium tax credit and any cost-sharing reduction has been applied;
  
  
• grant certifications for individuals who are exempt from the individual responsibility penalty if there is no affordable qualified health plan available through the Exchange or the individual’s employer;
  
  
• establish a Navigator program to award grants to entities to promote public education about and enrollment in Exchanges.

In order to be certified by the Exchange as a qualified health plan, plans must meet marketing requirements (to assure that they will not discourage enrollment of those with significant health needs), ensure a sufficient choice of providers, include essential community providers that serve the low income, be accredited on clinical quality measures including consumer assessment surveys, and use a standard format for presenting health benefits plan options. In addition, qualified plans in the Exchanges must abide by insurance market regulations relating to guaranteed issue, premium rating, and prohibitions on pre-existing condition exclusions.

In carrying out their activities, Exchanges are to consult with stakeholders such as enrollees, enrollment facilitators, representatives of small businesses and self employed individuals, State Medicaid offices, and advocates for enrolling hard-to-reach populations.

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