People who didn’t know the late Susan B. Waters or have the opportunity to hear her speak really missed out on one of the leading lights of the insurance...
May 21, 2014
Contact: Jenny Rosenberg, 202-224-6101
ROCKEFELLER: THE MINIMUM MEDICAL LOSS RATIO IS WORKING FOR CONSUMERS
Prepared Opening Remarks - Senator John D. (Jay) Rockefeller IV, Chairman
"Delivering Better Health Care Value to Consumers: The First Three Years of the Medical Loss Ratio"
Wednesday, May 21, 2014
Today's hearing is about an Obamacare success story. It's about a consumer protection provision in the law that has already saved American consumers billions of dollars.
Whether you call it the "MLR law" or the "80-20 Rule," it's responsible for the hundreds of thousands of rebate checks American families and small businesses have been receiving from their health insurance companies for the past two years. That's not something you see every day - an insurance company giving premium dollars back to its customers.
I understand that there are people in this country - maybe even here in this room -who find it hard to concede that anything good has or will come from the Affordable Care Act. But I think it's pretty clear at this point that this piece of the law is working the way we hoped it would.
To understand why we have this law, you have to remember how the commercial health insurance market worked before we passed the ACA. It was a market whose rules were rigged against consumers. Insurers could purge sick people from their rolls, and deny coverage to people with what they called "pre-existing conditions."
In the old health insurance marketplace, it was very difficult for consumers to compare products and choose plans, because the insurers wouldn't give us clear information about coverage and costs.
The Commerce Committee's work back in 2009 played a key role in exposing yet another problem with the health insurance market -many of the policies health insurance companies were selling to families and businesses were just not a good value.
We used the industry's own data to make this point. We looked at the percentage of every premium dollar health insurers were spending on health care, versus the percentage they were spending on administration, commissions, dividends, and other non-health care items. In health insurance industry jargon, this measurement is called the "medical loss ratio," or MLR.
What we found back in 2009 was a mixed bag. In some markets, insurers were efficiently spending 90 cents or more of each premium dollar on patient care. But in other markets - especially the market for individual health insurance - the numbers were shockingly low. Some insurance companies were pocketing as much as 50 cents of each premium dollar.
We also found that large national insurers selling the same products across states provided consumers in some states substantially lower value for their premium dollars than in other states.
When we talked to industry experts like Wendell Potter, we learned that the big for-profit insurance companies carefully tracked their MLRs and worked relentlessly to lower them. Their thinking was pretty simple: the less they spent on health care, the more money they had for their shareholders. It was a zero-sum game that pitted patients against profits.
To counter this strong incentive to provide less care to their customers, we told the health insurance companies they needed to spend at least 80 cents of each premium dollar on their customers' health care (85% in the large group market). If they spent less than 80% on patient care, they had to rebate a portion of the premium payments back to their customers.
This wasn't a crazy idea made up in Washington. Thirty-four states already had minimum medical loss ratio laws on their books. But because the requirements varied from state to state, health insurance companies could still sell low-value products in many markets.
As always happens when you propose a pro-consumer reform like this, the industry predicted dire consequences. A coalition of health insurance companies, agent and broker groups, and industry-friendly insurance commissioners fought this law at every step of the process.
I won't take the time to detail how much time and money the opponents of the MLR law spent trying to kill it, but my staff has prepared a report on the legislative history of the MLR law, which I now ask unanimous consent to place in the record of this hearing.
Now that the dust has settled and the data is in, it's hard to see what all of the fuss was about. Health insurers who have not met the 80% threshold have cut rebate checks totaling almost $2 billion to their customers. That's good news.
The even better news is that the law has forced insurance companies to review their operations and reduce their non-health care costs. Rebate amounts are dropping as health insurance companies increase the efficiency and quality of their products. That cost-cutting process has saved consumers hundreds of millions more.
The minimum medical loss ratio is a very simple idea, but it appears to have had a powerful, and very positive, effect on the health insurance market. Consumers are getting a better deal than they were getting 5 years ago.
I look forward to talking about how and why it has worked in the commercial market, and whether we can apply it in other parts of our health care sector, such as Medicaid managed care.