The Medical Loss Ratio (MLR) is a fairly arcane part of health reform, but it’s not difficult to understand. It’s simply the percent of premium dollars an insurer spends on medical care. In 2008 the average MLR was around 80%.
Former CIGNA executive Wendell Potter has said one of the most important things we can do to reform health care is regulate MLRs. What I would like to do here is use MLRs to illustrate how special interests corrupted the legislative process, from the first Congressional proposal to the final law. Fasten your seatbelt!
- No insurance can be offered in the exchanges unless the MLR is >90%
- What constitutes “medical care” is defined by the Secretary of HHS
The final House bill had no permanent MLR requirement
- Same as Ellison plan, except…
- WEASEL: The Secretary “shall take into account the circumstances of different plans and activities related to health services” (Is that even English???)
- WEASEL: Minimum MLRs dropped to 80% (for the individual and small group markets) and 85% (for the large group market)
- WEASEL: Instead of banning them from the exchanges outright, plans that don’t meet the minimum MLR pay rebates to subscribers
- WEASEL: What constitutes “medical care” is defined by state insurance commissioners rather than the Secretary of HHS, and is to include unpaid claims, reserves for future claims, and activities that improve health care quality (Everything but the kitchen sink!)
- WEASEL: Insurers write their own MLR report cards to be posted on the Department of HHS website
- WEASEL: The Secretary of HHS has discretion not to enforce the law if it could lead to “market turmoil”
The bottom line is that, while insurers would have preferred no MLR requirements at all, few of them will have trouble complying with this very watered-down law.