Health Care For America Now

Franken, Pascrell, Small-Business Owners Call on Insurance Commissioners to Stand for Consumers, not Big Corporations

Washington, DC - Health Care for America Now (HCAN), the 1,000-member coalition that led the successful fight for health reform, released a report today showing how the $892 billion health insurance industry is pressuring state insurance regulators to undermine a critical provision of the new law in order to protect its excessive profits. The insurers want to gut the proposed rules that would end their longtime practice of spending low percentages of premium dollars on actual medical care in certain states and for certain classes of customers. They want to continue using as much premium revenue as they like to reward Wall Street investors and overpaid CEOs.

"The insurance companies and their army of lobbyists are doing everything they can to undercut this law," said HCAN Executive Director Ethan Rome. "In order to feed their greed, they are pressuring regulators to change the very definition of what is ‘medical care' so they can sidestep these important new requirements."

The Affordable Care Act (ACA), signed into law by President Obama on March 23, 2010, represents an historic step toward ending the insurance industry's stranglehold on our health care, eliminating the worst insurance company abuses and guaranteeing that all Americans have quality and accessible medical care they can afford. The law requires that insurers meet a benchmark medical-loss ratio (MLR) - the minimum percentage of premium revenue that must be spent on medical care. The law specifies that insurers must spend on medical services at least 80 percent of health plan premiums collected from individuals and small employers and 85 percent of premiums from large employers, or rebate the difference to enrollees.

If the new law had been on the books in 2009, the six largest for-profit health insurance companies would have been required to refund $1.9 billion for that year alone, HCAN reported. These rebates would have represented only a small portion of their ever-growing profits. The top five for-profit health insurers alone recorded $12.2 billion in profits in 2009.

The MLR requirement will provide public information and a consistent benchmark for consumers to use in judging the relative value of different health plans. Today, there is significant variation in MLRs among and within insurance companies based on geography, market and product, with MLRs ranging from 94 to 33 percent (see Tables 2, 3, 4 and 5 in the report).

The long-term success of minimum MLR standards in improving insurance value will be determined by regulators' ability to defeat insurers' transparent attempts to restore the power they wielded before the ACA was enacted. America's Health Insurance Plans, the Blue Cross Blue Shield Association and their member insurers want to redefine MLRs by pressuring the National Association of Insurance Commissioners (NAIC) to give insurers vast discretion over what expenses they may classify as clinical and administrative costs. Already, Wellpoint Inc., the nation's largest private health insurer by enrollment, has reclassified $500 million in administrative costs as medical expenses. This raised its corporate-wide MLR by 1.7 percentage points without enhancing the value of their insurance plans as envisioned by Congress.

In addition to redefining what is medical care, the health insurance companies want to craft as many exceptions, transitions, and delays as possible to avoid meeting even the meager compromised standards they seek.

Senator Al Franken of Minnesota and Congressman Bill Pascrell Jr. of New Jersey appeared at the event today along with members of the Main Street Alliance, a network of state-based small businesses.

"I'm very pleased that HCAN is highlighting this important issue before regulations for medical- loss ratio are finalized," Franken said. "I was proud to champion this provision in health reform that will require insurers to put more premium dollars toward actual health care, not wasteful administration, marketing, or profits. Health reform will bring coverage to 32 million uninsured Americans, which will bring lots of new business to private insurers. We need strong regulations for medical-loss ratios so Americans can be confident that they're getting value for their premium dollars."

Pascrell authored key provisions of health insurance reform and advocated for small businesses in the House Ways and Means Committee.

"It's ironic that the insurance companies that advocated so vehemently for so-called free market principles last year are working so diligently to manipulate the insurance market this year through their lobbyists in Washington," Pascrell said. "The health insurance reform legislation we achieved this year was a call to our national conscience to provide every American access to affordable health care and help small businesses cover their employees. Insurance companies, on the other hand, are working to do as little as possible in supporting small businesses that try to provide coverage for their employees. It is my hope that the new HCAN report gives insurance companies impetus to do the right thing by small-business owners."

In a letter to the NAIC president this week, Senator Jay Rockefeller of West Virginia, chairman of the Senate Commerce Committee, urged the insurance commissioners not to succumb to the pressure applied by the industry.
"It is clear that health insurance companies are sparing no expense to weaken this new law and the protection it promises to America's consumers," Rockefeller said. "Health insurance companies and their allies have been furiously lobbying the NAIC to write the medical-loss ratio definitions in a way that will allow them to continue doing business as they did before the passage of health reform. The resources health insurance companies are throwing into their effort to weaken the medical-loss ratio appear almost limitless."

Senator Tom Harkin of Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee, could not attend the HCAN briefing but said it is important to protect the integrity of the medical-loss ratio standard passed by Congress.

"Shielding consumers from insurance industry abuses is an important element of the Affordable Care Act," Harkin said. "This report shows the benefits to consumers and small businesses of requiring insurers to spend an adequate amount of premium dollars on quality medical care. These standards ensure quality and value of coverage, which Iowans - and all Americans for that matter - greatly deserve."

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Health Care for America Now is a national grassroots coalition of more than 1,000 organizations in 46 states representing 30 million people. HCAN spent $51 million over the past two years in the fight to win passage of health reform and to keep Congress from being steamrolled by corporate special interests.