Few people were happy with everything in this year’s health care reform law. But one of the provisions that made a lot of sense – especially to health care providers – was rule that insurance companies have to spend 80 percent of their revenue on direct health care.
Sounds simple enough, but of course the devil is always in the details.
The big question is, how do you define “direct”? Not surprisingly, insurers preferred a rather broad interpretation, one that included the cost of commissions to agents selling their policies.
The federal government’s administrative language governing this “medical loss ratio” issue was the subject of this week’s meeting in Orlando, FL of the National Association of Insurance Commissioners (NAIC). The group leaders’ recommendations will now go to Health and Human Services Secretary Kathleen Sebelius for a final ruling.
Consumer groups felt they achieved a measured victory out of the recommendations. In the above example, sales commissions must be considered a part of an insurer’s administrative cost – not an expense connected with direct medical care.
Direct costs should include payments to physicians, nurses, hospitals and other health care providers – but not expenses related to billing, or controlling fraud, according to a report Friday in Kaiser Health News.
“It’s a good day for consumers,” NAIC consumer representative Timothy Jost, told KHN. “I think insurers won some and we won some. On the whole, the main point is the rules are faithful to the law.”
Of course the insurance industry disagrees and argues that the new rules will stifle competition, since only the largest companies will be able to comply. As a result, look for more market concentration beginning in 2011, these analysts say.
A major caveat: After a year or two of playing give and take with the Democratic leadership in Washington, health insurers are now actively courting ties with Republicans who are poised to take over important congressional leadership posts.
Cigna’s political action committee had been giving money to both Democrats and Republicans on a 50-50 basis during the health reform debate. They now reportedly favor Republican candidates 70-30.
How much of a game changer that will turn out to be is anybody’s guess.