Health Law and Policy Update
Headlines of the week
FMAP extension passes Senate vote
A vote in the U.S. Senate this week was an important step toward securing $159 million in additional Medicaid funding for Colorado, which will be crucial as the state continues to recover from the recession.
Senators passed legislation that contains an extension to the federal Mediciad assistance to the states, known as FMAP. The legislation extends FMAP for six additional months, until June 2011, and phases it out over that time. The bill now goes for a final vote in the U.S. House of Representatives. House Speaker Nancy Pelosi will call members back from their August recess to conduct the vote next week.
Missouri voters reject individual mandate
With 71 percent of the vote, Missouri voters approved Proposition C, which rejects the individual mandate provisions of the Affordable Care Act. Missouri was the first state to challenge the individual mandate through a referendum. While the vote might have political significance, the state must implement the Affordable Care Act so long as it is constitutional, since federal law controls states. According to news reports, the health care referendum was helped by a high Republican turnout. Kaiser Health News compiled a roundup of coverage from various sources.
Virginia lawsuit challenging Affordable Care Act will proceed
U.S. District Court Judge Henry Hudson allowed the proceeding brought by Virginia Attorney General Ken Cuccinelli to proceed to a full hearing-now scheduled for Oct. 18. The 32-page opinion included comments allowing Virginia standing to sue based on passing its own law shortly before President Barack Obama signed the federal Affordable Care Act. The Virginia law attempts to exempt residents from the insurance mandate in the Affordable Care Act.
Walter Dellinger, former Clinton Administration Solicitor General and a constitutional scholar, said "Virginia's law in the one that's transparently unconstitutional: It would mean that any state could pass any statute declaring any federal law...invalid in that state, and then bring a lawsuit to challenge the federal law, even though it has no federal stake or no obligation under that law. It just can't work like that," NPR reported.
What's new
Stakes are high as officials debate medical loss ratio definition
The nation's top insurance officials will meet in Seattle next week to discuss the definition of medical loss ratio (MLR), a key component of regulating insurance under the national health reform law.
The National Association of Insurance Commissioners (NAIC) was charged in the Affordable Care Act (ACA) with making recommendations to U.S. Health and Human Services Secretary Kathleen Sebelius for implementing the act, including defining medical loss ratio.
MLR refers to the percentage of a premium dollar a health plan (insurance company) spends on your medical care versus the amount spent on administrative costs and expenses such as advertising, profits, CEO salaries and commissions. An MLR of 80, for example, means 80 cents of every premium dollar is spent on actual medical care.
The Affordable Care Act imposes a cap on medical loss ratios. Beginning January 2011, health insurance companies must spend at least 80 percent or 85 percent of each premium dollar (depending on whether you have an individual, small group or large group policy) on medical care and quality-improvement activities. Insurers that don't meet the standard must pay rebates to their customers for the difference.
If the new MLR standards had been in place in 2009, health insurance customers would have realized rebates totaling $1.9 billion, Health Care for America Now estimated in a report released last month. For perspective, the five largest for-profit health plans recorded $12.2 billion in profits in 2009. The report includes some Colorado-specific data: "a WellPoint subsidiary that insures 63,000 customers spent only 33.2 percent on medical care, while another Colorado subsidiary of WellPoint with 71,000 members in employer sponsored groups had a MLR of 53 percent."
The definition of medical loss ratio is critical to controlling health-care costs and achieving transparency. Consumers are entitled to be well informed about the products they are being required to purchase, and those products ought to be required to deliver value. The calculation of medical and administrative costs should be fully transparent and clearly defined. An NAIC working group on MLRs has made recommendations that are the result of a carefully crafted compromise reached over many months of discussion.
Consumer advocates across the country have called for NAIC commissioners to adopt those recommendations. Insurance industry lobbyists have invested enormous time and energy in pressuring NAIC to reclassify many traditional administrative expenses as health-care costs and are asking NAIC to reopen the discussion before the recommendations proceed to a final vote.
Senator John D. Rockefeller, D-W.Va., sent a letter to NAIC in July outlining some of the issues. Rockefeller has been a champion for consumers in the discussion, and in the letter discusses: "strategies health insurance companies have been employing to game the new minimum medical loss ratio law." Rockefeller's concerns and other issues are summarized in a useful article on the website of the Commonwealth Fund.
The industry position is presented in a document produced by America's Health Insurance Plans.
A core area of disagreement is the definition of "quality." Consumer NAIC representatives agree only patient care and objectively measurable clinical quality improvement activities should count as medical costs in the MLR equation. Items such as the health insurance industry's need to move from the ICD9 to the ICD10 (ICD is the International Classification of Diseases) standard, which is underway because of a worldwide change in coding standards, should not be counted as quality improvement. Nor should activities that are fundamentally about controlling costs, such as utilization review.
In an Aug. 4 post on the New England Journal of Medicine's Health Reform Center, John Iglehart writes:
Before the NAIC sends its MLR recommendations for certification, which it is expected to do within weeks, it will be heavily lobbied by industry groups. According to the Center for Public Integrity, which funds investigative journalism, five of the country's largest health insurers are considering creating a nonprofit group, "bankrolling it to the tune of about $20 million," to influence legislators' views on MLR issues before the midterm elections. State insurance commissioners operate in a highly political environment and have sometimes been susceptible to industry pressure, although they may note that Aetna, Humana, UnitedHealthcare, and WellPoint all reported robust profits in the first half of 2010.
As former Cigna executive, now NAIC consumer representative, Wendell Potter, writes on the Center for Media and Democracy's blog:
This is too important not to get involved. Commissioners will be doing a great disservice to their constituents if they fall for insurers' disingenuous arguments. If they do, the real winners in this fight will be insurance company executives and their Wall Street masters. If they win this, that cartel of profit-driven corporations will be more firmly in control of our health care system than ever before.
Next meeting in Colorado on exchanges is Aug. 12
The next meeting on establishing a health insurance exchange in Colorado will be 9 a.m. Aug. 12 at National Jewish Hospital Molly Blank Conference Center. This is the second in a series of meetings to be held around the state. Check the state's website for details and parking instructions.
Consumer assistance program/ombudsman grants program applications announced
Colorado Commissioner of Insurance Marcy Morrison hosted a meeting this week to assess interest in pursuing a federal grant to help pay for establishing a state-based consumer assistance program. The grants are part of the Affordable Care Act. The grant application is due Sept. 10 and must be submitted by a state agency. Grant funding is for one year only, and applicants must be able to demonstrate sustainability. This is a significant opportunity to ensure consumers have a place to turn for help as they negotiate changes in insurance under health reform.
Community Catalyst produced a document about consumer assistance programs. For information about the grant requirements, check the official documents on file with the federal government.
Advancing the debate
Health reform reduces costs for patients in Medicare donut hole
Health reform will reduce out-of-pocket spending by 23 percent for seniors who fall into the Medicare prescription coverage gap, a report by Benjamin Hunt and Karen Davenport of the Center for American Progress shows. More than 55,000 Colorado Medicare beneficiaries are affected by the Medicare donut hole and have received $250 payments to help cover the cost of prescription drugs.
Reform law improves outlook for Medicare and Social Security
The annual trustees report on Medicare and Social Security was issued this week. The report states "the financial outlook for both Medicare and Social Security improved due to changes mandated by the new law overhauling the health insurance program." Because of the passage of the Affordable Care Act, the Medicare hospital insurance trust fund is now projected to stay solvent until 2029, 12 years longer than projected in the 2009 trustees report. According to the Associated Press, the trustees include administration officials, but the technical work is done by the Office of the Actuary, an independent Centers for Medicare and Medicaid Services department office that has disagreed with the Obama White House by asking questions about how the Affordable Care Act will affect Medicare.
What you can do
Support consumer possition on medical loss ratio
Colorado Commissioner of Insurance Marcy Morrison sits on the National Association of Insurance Commissioners' Health Insurance and Managed Care (B) Committee. You can ask her to support the consumer position on defining medical loss ratio and specifically the recommendations of the NAIC working group - don't let the insurance industry water them down.
For a detailed explanation of those recommendations see a letter written by NAIC consumer-funded representatives, including Colorado's consumer representative, Barbara Yondorf.
Schedule a presentation on health reform
Health reform can be confusing. The health staff at the Colorado Center on Law and Policy is ready to help community groups, medical professionals, lawmakers and others understand the complexities of health reform and how it will roll out during the next few years. Please contact us to schedule a presentation.
Health Law and Policy Update is issued weekly by the health staff of the Colorado Center on Law and Policy. Subscribe by e-mail or read previous editions.
Health Care Director
Elisabeth Arenales
Health Care Attorney
Adela Flores-Brennan
Special Counsel
Ed Kahn
Communications Director
Perry Swanson
Released Aug. 6, 2010