From Open Congress Nov 15, 2009 The Most Important Health Care Reform Provision You’ve Never Heard Of
For months, Bruce Webb has been tracking a provision in the House’s health care bills that has flown mostly under the radar. He calls it the “most important and most overlooked” aspect of the bills, and he may be right.
The provision in question is entitled “Ensuring Value and Lower Premiums.” In all of Congress’ health care bills it reads more or less like this:
“In General- Each health insurance issuer that offers health insurance coverage in the small or large group market shall provide that for any plan year in which the coverage has a medical loss ratio below a level specified by the Secretary (but not less than 85 percent), the issuer shall provide in a manner specified by the Secretary for rebates to enrollees of the amount by which the issuer’s medical loss ratio is less than the level so specified.”
In the end after much travail the Senate settled on a last minute 85/80 MLR between group and individual coverage, but the overall effect should be the same. And if anyone in the blogosphere beat me to this piece from July 28th, 2009 HR3200 Sec 116: Golden Bullet or Smoking Gun I’d like to hear it. With effective MLR regulation HCR works, without it it doesn’t. Which may explain why AHIP was broadly supportive of the bill until the MLR provision was restored at the last minute. And have been howling ever since.
This provision, if implemented correctly, almost totally strips the ability of insurance companies to combine cherry picking and premium increases to continue the huge profits they garner today. What it does is to establish a minimum ‘medical loss ratio’ which in simpler terms means a set ratio of care actually paid for to premiums collected. If by whatever means whether that be gaming the risk pool so an to only insure people unlikely to make claims or by denying coverage to insurees on a case by case basis your medical loss ratio drops below an established level the insurance company has to rebate the difference. In practice this prevents insurance companies from just arbitrarily jacking up rates and simultaneously takes the profit out of cherry-picking the risk pool. In a word this Sec automatically limits profits by establishing indirect price controls. Which is not going to make the insurance industry happy.
And no it didn’t. You read it here first. If you read it.