[Congressional Record Volume 157, Number 113 (Tuesday, July 26, 2011)]
[Senate]
[Page S4912]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself and Mr. Franken):
  S. 1416. A bill to amend title XVIII of the Social Security Act to 
increase the minimum loss ratio required of Medigap policies; to the 
Committee on Finance.
  Mr. KERRY. Mr. President, the Affordable Care Act helped to ensure 
that insurance companies spend a substantial portion of premium dollars 
on medical care and health care quality improvement, rather than on 
administrative costs and profits. However, due to remaining 
discrepancies not all Medicare beneficiaries are afforded the same 
protection under the law.
  Medical loss ratios make the insurance marketplace more transparent 
and make it easier for consumers to purchase plans that provide better 
value for their money. Beginning this year, the medical loss ratio 
provision in the Affordable Care Act requires insurance policies sold 
in the individual and small group markets to spend 80 percent of 
premium dollars on medical care. Policies sold in the large group 
market are required to spend 85 percent of premium dollars on medical 
care. Insurance companies that fail to meet this standard are required 
to provide a rebate to their customers beginning in 2012.
  The Affordable Care Act also required Medicare Advantage plans to 
spend 85 percent of premium dollars on medical care starting in 2014 or 
they would be required to refund the difference to the Federal 
Government.
  Compared to most other insurance products, Medigap policies now have 
lower statutory minimums for the percentage of premium dollars that 
must be spent on medical care. Under current law, Medigap policies must 
meet a minimum medical loss ratio of 65 percent in the individual 
market and 75 percent in the group market.
  In 1990, Congress first passed legislation standardizing Medigap 
policies and instituting minimum MLR standards in reaction to evidence 
of widespread sale of duplicative policies with high overhead. Today, 
more than 9 million Medicare beneficiaries purchase private 
supplemental Medigap policies to help cover cost sharing and 
deductibles in traditional Medicare.
  The Medigap Medical Loss Ratio Improvement Act updates the MLR 
standards for Medigap insurers, increasing the percentages to levels 
put forth in health reform for other products. Specifically, it will 
raise the MLR from 65 percent to 80 percent in the individual market 
and from 75 percent to 85 percent in the group marketplace. To give 
insurers time to prepare for this change, it would not become effective 
until 2014.
  This legislation is endorsed by organizations representing millions 
of senior citizens and consumers of all ages, including: AARP, AFSCME, 
Alliance of Retired Americans, Center for Medicare Advocacy, Community 
Catalyst, Families USA, Health Care for America Now, Medicare Rights 
Center, National Council on Aging, and the National Senior Citizens Law 
Center.
  In endorsing the bill, AARP highlights that, ``AARP supports this 
change because it will provide greater transparency and accountability 
for expenditures made by health insurance issuers, and encourage them 
to become more efficient in their operations to help ensure that 
consumers receive fair value for their premium dollars.''
  The reforms in this bill would ensure that Medigap enrollees receive 
the same value for their premium dollars that is afforded to every 
other American family. I look forward to working with my colleagues in 
the Senate to pass this legislation.

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