:: Medical Loss Ratios As Opportunity For Political Theater

he goal of many health care reformers is actually to get to a single payer system. President Obama has espoused this point of view and the “public option” was one track to get there.

The Patient Protection and Affordable Care Act (”PPACA”) will get there as well, but in two steps rather than one. The first step will be to force private sector options into untenable economic arrangements while all the while decrying the profit motive as the critical problem as premiums increase. This will make for great political theater and the actors are already taking positions on stage.

For example, I posted yesterday about the unworkable tangle of parameters that are embedded in the medical loss ratio strictures under the PPACA. Today we have Senator Rockefeller complaining about the characterization of expenses under the MLR rules.

The Senate Commerce Committee investigation began in August, 2009. The Committee staff report Chairman Rockefeller released today includes a review of recently filed 2009 medical loss ratio (MLR) information and highlights health insurance companies’ new efforts to “reclassify” their administrative expenses as medical expenses in the wake of health care reform. This staff report updates an analysis of 2008 insurance industry data that the Senate Commerce Committee released last November.

The Huffington Post finds this report an opportunity to accuse health insurance industry of ” starting to game a key element of health care reform months before it even takes effect . . .”

Really?  I don’t think so.

Other than individual policies, the insurance industry appears to have met the MLR standard.  The Wall Street Journal carries a more balanced view of the Senate Report, stating that:

In most instances, among the large, publicly managed-care companies–including Aetna Inc. (AET), WellPoint and UnitedHealth Group Inc. (UNH)–MLRs for individual policies last year didn’t reach the upcoming 80% minimum, though most met that mark for small-group plans. Most of the big insurers also met or came close to the 85% MLR for large group plans, according to the committee report. Cigna Corp. (CI) was the only major insurer with an individual-market MLR that surpassed the upcoming minimum, the report showed.

Those numbers represent an average of each of the companies’ many subsidiaries with varying MLRs. The report cites an Oppenheimer analysis that says the markets where WellPoint subsidiaries have low MLRs are “the most profitable tail” of WellPoint’s business.

. . .

Cigna said Thursday it is too early to say how the new MLR minimums will affect the company and that since the definitions are being worked on, the insurer doesn’t intend to restate its MLR at this time.  UnitedHealth Group said it doesn’t intend to change how it calculates the ratios before new guidance is provided. Aetna said recently it hasn’t reclassified any costs.

Robert Zirkelbach, spokesman for industry trade group America’s Health Insurance Plans, said government data show that “the percent of premiums spent directly on medical care has increased for six straight years. At the same time, health plans are doing more in the areas of disease management for chronic conditions, care coordination, prevention and wellness, and health information technology.

“It is important to ensure that the new MLR requirements do not undermine essential programs and services that are working to improve the quality and safety of patient care,” Zirkelbach said.

Last year, he said, the percentage of premiums used on overhead costs and profits declined for the sixth straight year.

(emphasis added)

The Procrustean MLR concept is flawed as explained by James Robinson in his influential Health Affairs article noted in my prior post.  If the predictable “accounting nightmare” is troublesome, it is only the fault of the politicians that voted for a bill they most assuredly did not understand.

For those who hope to undermine the private sector insurance industry in favor of a Canadian-style single payer system, however, the real gaming is the notion that any of these bureaucratic hurdles has any goal other than the migration to a single payer system.

That change in the American system will likely disappoint affluent Canadians, however, who have heretofore chosen the U.S. for their own health care.