Obamacare in Tomorrowland

• Jonathan Cohn

  Jonathan Cohn

  Senior Editor

  view bio

  • Obamacare in Tomorrowland
  • Who Doesn't Want Health Insurance?
  • No Respect
• October 21, 2010 | 12:00 am

Health care reform has been in the news a lot lately: Judges are ruling on whether the individual mandate is constitutional, companies are announcing changes to their health plans, and congressional candidates are arguing over repeal.

But there’s another big story happening, down in central Florida, where some state-level officials, a handful of consumer advocates, and a whole bunch of insurance industry lobbyists are fighting over how to implement a key part of reform.

[SNIP]

The issue at hand is how insurance companies spend their money. All insurance carriers have what is known as the “medical-loss ratio.” It refers to the amount of revenue that insurers eventually devote to actual patient care. Wall Street and the industry like that number to be as low as possible, because, among other things, a low MLR leaves more room for profits. Consumer advocates prefer the MLR to be as high as possible, because it rewards social responsibility and, to some extent, efficiency.

The architects of health care reform largely saw things from the standpoint of consumer advocates. And the Affordable Care Act reflects this. It sets a minimum standard for every insurer’s MLR--80 percent for plans that cover individuals and small businesses, 85 percent for plans that cover large groups. That's higher than many commercial insurers run now. Once the regulations are in place, insurers that don’t bring their balance sheets in line with the MLR standard will have to provide beneficiaries with rebates.

The significance of this regulation is the subject of some debate, even among like-minded advocates of reform. I know experts who think it’s a critical bulwark against high premiums. And I know experts who think, ultimately, it will have little effect. But even those experts who downplay the policy importance see it as a bellwether. If you watch how the administration decides to write and enforce this regulation, they say, you’ll get a sense of how it intends to handle other regulations--and, more generally, the way it intends to deal with the insurance industry over the next few years.

That brings us to the big debate taking place in Florida. Like so many other elements of the Affordable Care Act, the MLR regulations leave a lot of room for interpretation and discretion. Although the law sets the numerical targets for what insurers spend, it doesn’t stipulate exactly how the government should tally and process those numbers. Instead, it lets the Secretary of Health and Human Services (i.e., Kathleen Sebelius) make those decisions. And it instructs her to consider, although not necessarily follow, the recommendation of the National Association of Insurance Commissioners--the group meeting now at the Gaylord Palms Resort, just down the road from Disney World.

But it’s not clear whether they’ll succeed. Nor is it clear how the administration will react if they don’t. Yes, the administration wants a tough set of regulations that will make insurers behave;. But it also wants to avoid headlines about insurers threatening to drop plans because “Obamacare” was too tough on them. I don't have a great fix on how this debate is playing out internally, but I gather not every official within the administration agrees on how to reconcile those goals.

So stay tuned, on Thursday and beyond...

Full article @ TNR Blog

====================

My thoughts:

MLR is the heart of the Health insurance reform. With two simple percentage numbers, it forces major restraint on the health insurance industry and forces them to put more of their money into health CARE, less into administration.

MLR needs to work in favor of the consumers... and it is only through that that we will get Health CARE Reform.  The REGULATION implementing MLR requirement of the legislation will need to make this happen.  Any oversight body governing this needs to be ever-watchful to not let up on MLR.  This is all-important.  Keep a close eye on MLR related regulations and oversight action.

==

Here is Jonathan Cohn's prior related article

Get Ready for Sebelius v. Insurers (Cohn, TNR, 8/17/10)