[Congressional Record Volume 157, Number 171 (Wednesday, November 9, 2011)]
[Senate]
[Pages S7289-S7290]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PATIENT PROTECTION AND AFFORDABLE CARE ACT
Mr. COBURN. Mr. President, I believe Congress should reexamine the
federally mandated medical loss ratios in the Patient Protection and
Affordable Care Act. Today I will outline four reasons I believe
consumers will face increased costs, decreased choice, and reduced
competition.
The Patient Protection and Affordable Care Act, PPACA, included a
provision that requires all health plans to adhere to a medical loss
ratio, MLR, established in law. The MLR refers to the percentage of
premium revenues for health insurance plans spent on medical claims.
Thus, if a plan received $100 of premiums and spent $85 on medical
claims its MLR would be 85 percent.
Beginning no later than January 1, 2011, PPACA requires a health
insurance issuer to provide an annual rebate to each enrollee if the
ratio of the amount of premium revenue expended by the issuer on
clinical claims and health quality costs, after accounting for several
factors such as certain taxes and reinsurance, is less than 85 percent
in the large group market and 80 percent in the small group and
individual markets.
Supporters of PPACA tend to herald the newly created, higher MLR
requirement as providing ``better value'' for policyholders compared to
a lower MLR. To the untrained ear, perhaps higher MLRs sound better
since they force health insurance plans are required to spend a larger
percentage of each dollar on medical claims.
Jamie Robinson, a professor in the School of Public Health at the
University of California at Berkley, noted that numerous organizations
``have assailed low medical loss ratios as indicators of reduction in
the quality of care provided to enrollees and sponsored legislation
mandating minimum ratios.'' However, he rightly concludes that while
``this is politically the most volatile and analytically the least
valid use of the statistic.''
In fact, a close examination of the data suggests there are several
reasons to be concerned with the one-size-fits-all federally mandated
MLRs in PPACA. Here are four key reasons why PPACA's MLRs will likely
negatively impact American consumers and patients.
First, insurance markets across the country threaten to destabilize.
During the health reform debate, opponents of the Federal takeover of
health care warned that the federally mandated MLR could endanger the
high-quality health coverage many Americans enjoy because it could lead
to market destabilization in some States. Under PPACA, States are
permitted to adjust the percentage for the individual market only if
the Secretary of Health and Human Services grants them a waiver because
the Secretary determines that the health insurance market would
otherwise be destabilized. Unsurprisingly, a total of 15 States have
applied for a waiver from the MLR. This means that nearly one in three
States has found that the MLR could destabilize their market and
threaten consumers' coverage.
A review of the data shows why States are concerned. According to a
study published in The American Journal of Managed Care, the specific
impactof the new medical loss rules on the individual health insurance
market ``has the potential to significantly affect the functioning of
the individual market for health insurance.'' Using data from the
National Association of Insurance Commissioners, the study's authors
``provided state-level estimates of the size and structure of the U.S.
individual market from 2002 to 2009'' and then ``estimated the number
of insurers expected to have MLRs below the legislated minimum and
their corresponding enrollment.'' They found that in 2009, ``29 percent
of insurer-state observations in the individual market would have [had]
MLRs below the 80 percent minimum, corresponding to 32 percent of total
enrollment. Nine states would have atleast one-half of their health
insurers below the threshold.''
The study explained the impact in ``member years,'' which requires
some explanation. Most health insurance policies typically have a 12-
month duration, but individuals can enroll or disenroll on a monthly
basis. As a result, much of the accounting and actuarial calculations
that a health insurance plan makes are in member month or year terms. A
member year is 12 member months and could be one individual or multiple
persons. For example, if an individual is enrolled for 12 months, that
is one member year, or if two people are enrolled for just 6 months
each, that is one member year. The study found that ``if insurers below
the MLR threshold exit the market, major coverage disruption could
occur for those in poor health,'' and they ``estimated the range to be
between 104,624 and 158,736 member-years.'' This empirical analysis
highlights the huge disruption American consumers may face. As health
insurers consolidate, stop offering some insurance products, or exit
the market place altogether, Americans who like the high-quality
private health plan they have will lose it. This effect would undermine
the President's promise to Americans that if they like the health care
plan they have, they could keep it.
There is a second concern: Instead of consumers receiving ``better
value,'' consumers face increased costs. Despite often-repeated
arguments that federally mandated MLRs will result in ``better value''
for consumers, there is little substance to back up this claim. The
assumption behind this claim is that spending more cents of a health
care dollar directly on care is inherently better. But this may not
necessarily be the case. University of California, Berkley, professor
Jamie Robinson has studied the issue of MLRs closely, and he noted in
Health Affairs that the connection between the MLR and good value is
not as clear as some would claim. ``The medical loss ratio never was
and never will be an indicator of clinical quality,'' he said. In fact,
Professor Robinson explained that ``neither premiums nor expenditures
by themselves indicate quality of care. More direct measures of quality
are available, including patient satisfaction surveys, preventive
services use, and severity-adjusted clinical outcomes. Although each of
these is limited in scope, they at least shed light on quality of care.
The medical loss ratio does not.''
While the MLR cannot guarantee better value for consumers, it can
lead to higher premium costs. As the Congressional Research Services
explained,
[[Page S7290]]
the MLR provision in PPACA requires health insurance plans ``to pay
rebates to their members if a certain percentage of their premiums are
not spent on medical costs. This provision may provide an incentive for
health insurance companies to reduce their compensation to and/or
utilization of producers as they seek to reduce their administrative
costs in relation to their medical costs.''
In this scenario, unintended consequences are important to consider.
For example, an insurer may increase premiums in another product to
make up for lost revenues in one where a rebate is issued. Also
insurers may be incentivized to scale back utilization management
techniques as a result of the MLR requirement. Accordingly the
underlying medical trend which drives premium costs would increase for
everyone in the risk pool, therefore leading to higher premiums for all
consumers who have a health plan with that company.
Costs for consumers may also increase because of increased fraud in
the system. Because insurance plans are economically discouraged from
activities not directly connected to medical care, there is a perverse
incentive to reduce efforts to police fraud such as conducting
utilization reviews and data analysis to root out individuals who
defraud the system. This is such a significant problem that it was
highlighted in congressional testimony before a House subcommittee
earlier this year. ``Given the role that health plan fraud prevention
and detection programs have played in establishing effective models for
public programs, improved data for law enforcement, and successful
prevention efforts, we believe the MLR regulation's treatment of such
programs should be reevaluated,'' said the witness. According to the
testifying witness, the specific concern is `` the MLR regulation only
provides a credit for fraud `recoveries'-- i.e., funds that were paid
out to providers and then recovered under pay and chase' initiatives.''
This effectively discourages preventative measures:
The MLR regulation's treatment of fraud prevention expenses
works at cross purposes with new government efforts to
emulate successful private sector programs, and it is at odds
with the broad recognition by leaders in the private and
public sectors that there is a direct link between fraud
prevention activities and improved health care quality and
outcomes.
Ironically, this myopic focus on MLRs obscures the best tool to
evaluate the value of a health insurance product: consumer choice. As
Professor Robinson explained:
The best indicator of current and expected future value in
a market economy is the willingness of the consumer to
purchase and retain the product. In health care, this
translates into measures of growth in enrollment and
revenues, adjusted for disenrollments and changes in prices.
Plans that are growing are offering something for which
purchasers are willing to vote with their dollars and
consumers are willing to vote with their feet.
Let me turn to my third concern. Consumers face fewer choices, less
competition in the marketplace. As noted previously, the MLR threatens
to destabilize several markets by pushing some health insurance plans
to stop offering some insurance products, or exit the market place
altogether. The Congressional Research Service explained this more in
detail in a memo to Congress. CRS said the MLR ``requirements of PPACA
will place downward pressures on administrative expenses, including the
use of insurance producers. Thus, there will be an incentive for
insurance companies to cut back on the use of producers or reduce their
commissions in order to rein in their administrative expenses. Some
observers, including associations of producers, have suggested that the
regulatory and market changes resulting from PPACA could put producers
out of business.''
The very allowance in PPACA for waivers from the MLR provision is a
tacit admission the one-size-fits-all MLR approach mandated under PPACA
is neither in the best interest of consumer choice nor competition
among health plans in many insurance markets across the country.
President Obama once publicly pushed for a government-run health plan
under the auspices of more ``choice and competition,'' Unfortunately,
the controversial health care law he signed is set to reduce choice and
competition for millions of American consumers.
Mr. President, finally, the new mlr mandates further the government
takeover of health care. Much ink has been spilled about the claim that
PPACA represents a government takeover of health care. In my view,
there is no disputing this claim. Even before the passage of PPACA, the
nonpartisan Congressional Research Service issued a report showing that
60 percent of health care spending in the United States is controlled
by State, local, and Federal governments. Now, after passage of the
controversial health care law, the Federal Government will effectively
regulate health insurance markets and dictate what types of health
coverage Americans can buy--even penalizing employers and consumers who
do not offer or purchase coverage. The law also massively expands the
Medicaid Program--a program that began as a Federal-State partnership
but that has evolved into a gimmick-ridden program threatening State
budgets and too often promising patients coverage while denying them
access to care. The law also includes hundreds of new powers for the
Secretary of Health and Human Services and creates dozens of new
programs that will further interfere in the practice of medicine. Yes,
the law is a government takeover of health care.
Interestingly, the nonpartisan Congressional Budget Office warned
that if the MLRs in PPACA were only slightly higher, PPACA would result
in a complete government takeover of all health insurance. In a
December 2009 analysis, CBO warned that if the MLRS were 5 percentage
points higher, all private insurance would become ``an essentially
governmental program.'' In fact, this CBO analysis--publicized before
the health care bills became law-- may be one key reason the Democrats
refrained from pushing for a 90-percent MLR. CBO warned that if a 90-
percent MLR were adopted, ``taken together with the significant
increase in the Federal government's role in the insurance market under
the PPACA, such a substantial loss in flexibility would lead CBO to
conclude that the affected segments of the health insurance market
should be considered part of the federal budget.'' If the bills'
authors had, in fact, included a 90-percent MLR, they would have faced
critics waving a CBO analysis affirming the government takeover of the
health insurance industry was complete. However, even with this
determination, CBO appeared to admit that determining at what point a
high MLR triggers a complete government takeover of the insurance
industry was not entirely cut and dry. CBO said, ``Setting a precise
minimum MLR that would trigger such a determination under the PPACA is
difficult, because MLRs fall along a continuum.''
Mr. President, in the end though, CBO settled on 90 percent as the
tipping point, though, as they noted, any ``further expansion of the
Federal Government's role in the health insurance market would make
such insurance an essentially governmental program, so that all
payments related to health insurance policies should be recorded as
cash flows in the federal budget.'' In other words, this was just about
as close as the Democrats could get without even CBO admitting it was a
complete government takeover of the health insurance markets.
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