Triggers and Secs 111-116 of HR3200
by Bruce Webb
DC and the blogosphere are all over the resurrection of the Public Option Trigger, the idea that with the right legislation the insurance companies would just straighten up and fly right. Most of the Left is pretty cynical about the idea and rightly so given the insurance companies several decade pattern on driving down what they call their ‘medical cost ratio’, i.e. the amount of your premium dollar actually spent on paying providers for medical care. Where that ratio used to be 95% now it is down to 80%, meaning that insurance companies are taking four times the share of your premium dollar than in the past. The question is whether you could craft legislation that would control overall premium costs in a way that would not pull the trigger? Well I think you can and in fact it has already been done. If you excised the public option what would be left in the bill to control costs? To start with Secs 111-116.
Subtitle B—Standards Guaranteeing Access to Affordable Coverage
SEC. 111. PROHIBITING PRE-EXISTING CONDITION EXCLUSIONS.
A qualified health benefits plan may not impose any pre-existing condition exclusion (as defined in section 2701(b)(1)(A) of the Public Health Service Act) or otherwise impose any limit or condition on the coverage under the plan with respect to an individual or dependent based on any health status-related factors (as defined in section 2791(d)(9) of the Public Health Service Act) in relation to the individual or dependent.
SEC. 112. GUARANTEED ISSUE AND RENEWAL FOR INSURED PLANS.
(snip-the title of Sec 112 tells the story. Plus no recision except for fraud, as defined by the govt and not the insurance co.)
SEC. 113. INSURANCE RATING RULES.
(a) IN GENERAL.—The premium rate charged for an insured qualified health benefits plan may not vary except as follows:
(1) LIMITED AGE VARIATION PERMITTED.—By age (within such age categories as the Commissioner shall specify) so long as the ratio of the highest such premium to the lowest such premium does not exceed the ratio of 2 to 1.
(2) BY AREA.—By premium rating area (as permitted by State insurance regulators or, in the case of Exchange-participating health benefits plans, as specified by the Commissioner in consultation with such regulators).
(3) BY FAMILY ENROLLMENT.—By family enrollment (such as variations within categories and compositions of families) so long as the ratio of the premium for family enrollment (or enrollments) to the premium for individual enrollment is uniform, as
specified under State law and consistent with rules of the Commissioner.
(snip-rest of section calls for a study)
SEC. 114. NONDISCRIMINATION IN BENEFITS; PARITY IN MENTAL HEALTH AND SUBSTANCE ABUSE DISORDER BENEFITS. (self-explanatory)
SEC. 115. ENSURING ADEQUACY OF PROVIDER NETWORKS.
SEC. 116. ENSURING VALUE AND LOWER PREMIUMS.
(a) IN GENERAL.—A qualified health benefits plan shall meet a medical loss ratio as defined by the Commissioner. For any plan year in which the qualified health benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment sufficient to meet such loss ratio.
(b) BUILDING ON INTERIM RULES.—In implementing subsection (a), the Commissioner shall build on the definition and methodology developed by the Secretary of Health and Human Services under the amendments made by section 161 for determining how to calculate the medical loss ratio. Such methodology shall be set at the highest level medical loss ratio possible that is designed to ensure adequate participation by QHBP offering entities, competition in the health insurance market in and out of the Health Insurance Exchange, and value for consumers so that their premiums are used for services.
This if enforced as a pretty strong combination, insurance companies have to take all comers without regard to physical or mental condition, charge each individual or family in the area the same rate, with a small exception of a 2-1 ratio between young and old. Additionally they can’t rescind the policy for any reason except non-payment or fraud as defined by statute, nor can they refuse to renew it. And most importantly they have to stay within a set medical-loss ratio.
Now clearly the weak point here is that medical loss ratio. Companies will have an interest in making the case that it just HAS to be set lower in each future year, and you can hear the stories now from both directions, companies crying poor while critics point out not so poor that they can’t afford First Class air travel. So what would a Trigger look like in this mix? Well it seems that it would have to be tied to a certain irreducible medical loss ratio. So we could imagine that the typical acceptable medical loss ratio was set at 95% for Year 1 with a Trigger set at 85%. Each year the companies could try to argue that they need to get a lower ratio and maybe make their case. But each step down gets them closer to Triggering the Public Option and so forces them to strive for efficiencies on the business side not related to denying care outright.
The model works. On paper anyway. The devil is in getting the initial Medical Loss Ratio right and not letting the trigger point get too low. I would still push for a Public Option which allows direct inspection of and competition between Medical Loss Ratios between public and private plans rather than some process of renegotiating them each contract renewal period. But it is not crazy to entertain the idea of a Trigger mechanism.