H. R. 1628 – “Better Care Reconciliation Act of 2017”
U.S. Senate, June 2017
SEC. 205. MEDICAL LOSS RATIO DETERMINED BY THE STATE.
Section 2718(b) of the Public Health Service Act (42 U.S.C. 300gg–18(b)) is amended by adding at the end the following:
“(4) SUNSET.—Paragraphs (1) through (3) shall not apply for plan years beginning on or after January 1, 2019, and after such date any reference in law to such paragraphs shall have no force or effect.
“(5) MEDICAL LOSS RATIO DETERMINED BY THE STATE.—For plan years beginning on or after 24 January 1, 2019, each State shall—
“(A) set the ratio of the amount of premium revenue a health insurance issuer offering group or individual health insurance coverage may expend on non-claims costs to the total amount of premium revenue; and
“(B) determine the amount of any annual rebate required to be paid to enrollees under such coverage if the ratio of the amount of premium revenue expended by the issuer on non-claims costs to the total amount of premium revenue exceeds the ratio set by the State under subparagraph (A).”.
42 U.S.C. 300gg–18(b):
By Don McCanne, M.D.
By now you likely know that the current Senate proposal to modify the Affordable Care Act (ACA) would sharply reduce spending for the Medicaid program and would result in higher insurance premiums for plans that provide less financial protection, while reducing taxes for the wealthy. The proposal has been appropriately labeled as being “mean.” But to get a feeling of the flawed policy process behind their proposal, let’s look at just one small example: the medical loss ratio.
Under ACA, all insurers, not just the insurers offering exchange plans, must spend a minimum percentage of their premium revenue on health care benefits – 80 percent for individual and small group plans and 85 percent for large group plans. Spending money on health care is considered a loss to the insurers and thus the percentage spent is known as the medical loss ratio. If they spend more than 20 percent or 15 percent, respectively, on administrative costs or profits, then they must provide rebates to the enrollees.
When ACA was crafted, it was acknowledged that the U.S. health care system wasted tremendous resources in administrative excesses. It was not uncommon for some private insurers to keep 30 percent or even more of the premiums for their own administrative costs and profits. By placing limits on the administrative costs, a dent could be made in reducing this waste. It is important to note that only a small fraction of the total waste in our system is recovered by establishing medical loss ratio minimums – only a tiny portion of what would be recovered if we switched to a single payer national health program. But it was a start.
Sec. 205 of Title II of the Better Care Reconciliation Act – the Republican bill – sunsets 42 U.S.C. 300gg–18(b) – the ACA medical loss ratio provisions (link above), eliminating the 80 and 85 percent federal ratio requirements. It transfers the responsibility to the states. This sounds like no big deal, but when we observe how many of the states are heartlessly refusing to expand their Medicaid coverage, it does not take much imagination that some states will establish policies that will enable private insurers to divert more of the premium dollars to investors and executives, at a cost to plan beneficiaries. After all, as many have reported, this entire scheme has been designed to take health care from the masses and give the monetary gains to the wealthy.
Former Congressman Henry Waxman, a leader in crafting the House version of ACA, states it well in a Los Angeles Times op-ed (June 22, 2017):
“Legislation needs to pass sufficient public scrutiny or it’s unworthy of becoming law. If monumental, transformative legislation can be written in the dark and enacted in a rush— and children’s lives are compromised or ruined so that billionaires can get tax cuts they don’t need — it would rank among the worst scandals in U.S. history. Americans of conscience must mobilize now to stop this from happening.”
The real scandal is that we continue to dink around with the most expensive and least efficient model of financing care – our dysfunctional, fragmented system composed of a multitude of private and public plans – when what we really need is to fix Medicare and then include everyone. Under that more enlightened system money spent on health care is not considered a loss but rather a benefit for the health of each of us and the health of the nation at large.
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