Crouching Lieberman, Smoking Gun

Bruce Webb | December 16, 2009 11:11 am

I don’t pretend to know Joe Lieberman’s motivation, but it’s working to perfection if his goal is to divide Party leaders (Obama, Reid, etc.) from the Democratic progressive base. I don’t remember seeing this level of outrage from movement progressives before, and I wonder if the only possible way to quell it is to secure Snowe’s vote for reform and then remove Lieberman from his chairmanship. I’m not necessarily advocating that, but many people (including many on the Hill) believe that he is playing us for chumps (not waiting for the CBO score of the Medicare buy-in, opposing something he advocated a couple of months ago), and there need to be consequences. It’s not an easy decision, though, and I don’t envy Reid.

Let me help this Hill staffer out, because I am suspecting Joe’s motivation is as clear as A B C, or more precisely M L R. More below the fold. Why did buy-in become a deal breaker? Why did the CBO score no longer make a difference? Maybe because that was not the issue at all. Lets take a trip in the Way-Back Machine.

Back at the end of July I suggested that the most important section of the House version of the Health Care Bill had simply been overlooked and that its existence made apparent weaknesses of the bill go away and fully justified (from their perspective) insurance company resistance to the bill even as it delivered to them 30 million new customers. Sec 116: Golden Bullet or Smoking Gun. Sec 116 set up a mandatory minimum Medical Loss Ratio (MLR) for each plan in the exchange and ultimately every plan in the country meaning that private insurance would have to learn to live on a diet. All of their in house expenses from advertising to executive salaries to profit would have to come out of a fixed ratio of premium dollar to actual payments to providers with that ratio set by the Health Choices Commissioner. It was pretty clear to me then that private insurers would see this as the smoking gun that would ultimately would force them to leave the health insurance market in search of weaker game to prey on (because once you remove the opportunity to make fat profits by denying care what the hell fun is there?) Making Sec 116 Target One.

My fears were realized. While the HELP version of the bill had a stricter version, it was nowhere to be seen in the Senate Finance Chairman’s Mark. And while both the House Speaker’s and Majority Leader’s versions of the bill had some of the relevant language in each case it no longer applied to plans offered through the Exchange but only as an interim cost control measure while the Exchange was being set up. HR 3962 as Passed: the Importance of Close Reading. HR 3962 had alternate mechanisms to ensure profit controls, but they lacked the elegance and certainty of Sec 116, on this important issue the private insurers had won.

Well a funny thing happened on the way to Victory Lane. In the course of private insurance supporters attempts to eliminate any trace of a government competitor in the form of a public option something happened. At the last minute progressives apparently in the midst of caving to every demand inserted one provision. They brought back the slain Sec 116 with a vengence by insisting that they get in exchange for the PO a MLR of 90% which was about the same ratio as insurance companies were getting in 1996 but a good ten points higher than they get now, and much higher than their current target. After all Aetna just announced plans to drop 360,000 people from its roles explicitly to get their margins up by getting their MLR down. Aetna Forcing 600,000-Plus To Lose Coverage In Effort To Raise Profits

“The pricing we put in place for 2009 turned out to not really be what we needed to achieve the results and margins that we had historically been delivering,” said chairman and CEO Ron Williams. “We view 2010 as a repositioning year, a year that does not fully reflect the earnings potential of our business. Our pricing actions should have a noticeable effect beginning in the first quarter of 2010, with additional financial impact realized during the remaining three quarters of the year.”

This was Dec 4th, an open admission that Aetna’s MLR was too high for stockholder comfort and that forcing 600,000 people off their rolls and so perhaps not being able to afford coverage anywhere being just the price they had to pay for profits.

News of a requirement that all companies had to meet an MLR of 90% must have come as quite the shock to CEO Williams and all his colleagues in the industry, it blew a huge hole in a business plan that relied on only insuring people who were unlikely to actually make claims and yet would be willing to pay higher premiums just in case. Yet it put them in a bind. How do you actively propose the bill simply on the basis that it would cut your profit margin? Simple. You just get your barking seals in Congress to claim that it is all a matter of principle, that an opt-in Medicare plan that you enthusiastically endorsed three months ago was now a deal-breaker, all without any of the letters R L or M dropping from your lips.

A lot of what is otherwise inexplicable about Lieberman and even Snowe’s current stance falls into place when you rearrange those letters into M-L-R. Don’t wait for the score, don’t insist on a full reading of the bill before passing judgement, insurance companies know all that they need to know for an all-out drive to kill the bill: “MLR 90%”.

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