The Affordable Care Act (ACA) has created a new system of health insurance exchanges. States can design and implement the exchanges to offer new opportunities for access to affordable, accountable health insurance. California’s law is the first in the nation..
Under the federal ACA, exchanges will open in 2014 to offer standardized insurance plans to individuals and small businesses, with subsidies available to people earning up to 400% of the federal poverty level. The California law creates a 5- member governing body with two important features. First, it must “take into consideration the cultural, ethnic, and geographical diversity of the state so that the board’s composition reflects the communities of California.” Secondly, its strong conflict of interest provisions exclude participation by active agents of the insurance and health care industries.
In a key provision for affordability, the state will have the right to engage in “selective contracting” with insurance plans, meaning it will be able to negotiate on premium rates. In addition, it has the right to “require carriers to offer additional products within each of” the five levels of coverage specified by the ACA. These could conceivably refer to supplementary dental plans.
The exchanges for individuals and small employers are initially separate. They could be united in the future, pending a study due by 2018.
The exchange must be self-supporting, after repaying an initial loan for administrative start-up, although there is a prospect for General Fund support. Critics have noted that this funding limitation could hamper the exchange’s viability.
The law includes other important features. It requires coordination with existing health programs. The exchange must provide “oral interpretation services in any language for individuals seeking coverage through the Exchange and makes available a toll-free telephone number for the hearing and speech impaired.” And, “The board shall ensure that written information made available by the Exchange is presented in a plainly worded, easily understandable format and made available in prevalent languages.” Further, the Board must “consult with stakeholders relevant to carrying out” its activities, including “health care consumers who are enrolled in health plans, individuals and entities with experience in facilitating enrollment in health plans, representatives of small businesses and self-employed individuals, the State Medi-Cal Director, and advocates for enrolling hard-to-reach populations.”
Read the bills here:
California Exchange Bill AB 1602
CA Exchange Bill – Senate Bill 900 (Governance)
Showing posts with label health insurance. Show all posts
Showing posts with label health insurance. Show all posts
Monday, October 11, 2010
Thursday, August 12, 2010
Insurance co.s want to make you healthy! They also have a bridge for sale
The still-fragile Affordable Care Act (ACA) gives the public a fighting chance at reining in health insurance premiums. But we’re going to have to wrestle with the insurance industry every step of the way. As the National Association of Insurance Commissioners (NAIC) convenes in Seattle today, the public has the imperative to stick up for ourselves. Here’s what’s at stake in this round.
Starting in September, health insurance plans are required to spend at least 80-85% of the premium we pay them on actual health care. Executive bonuses, administration, marketing and profits are limited to the other 15% (in large plans) to 20% (in small plans). This is supposed to incentivize the insurance industry to operate efficiently and to negotiate assertively with health care providers. rather than simply passing on cost increases to consumers.
The $2.5 trillion dollar question is this: how do you define actual health care? The Secretary of Health and Human Services defines this figure, known as the Medical Loss Ratio (MLR), after consulting with the NAIC. And the insurance industry has not been shy.
The insurance industry is asking the NAIC to define the MLR to its advantage, by counting marketing programs, including those with public health themes, as medical expenses, rather than the administrative expenses they clearly are.
The aims of the relevant section of the law (Sec. 2718) - low cost care that offers value to consumers – conflict with the financial imperatives of the health insurance industry, to maximize profits and returns to shareholders, as well as administration, including executive compensation. Proposals by the insurance industry call for calculating the MLR in a way that will frustrate the aims of the law. The MLR is a ratio, with all medical claims (in the numerator), divided by total premiums (in the denominator). A high MLR means that the insurance company is spending a relatively higher share of premium income on its members' medical care and less for administration and profit. A low MLR means that the insurance company is returning less in medical care benefits to its members while retaining more for executives and shareholders; this can also signal a solid opportunity for investors.
To fairly achieve an 85% MLR, a company would have to show that the amount spent on medical claims (in the numerator) is high relative to premiums. But companies can frustrate the intent of the law by defining medical claims to include other expenses, including expenses typically considered part of administration.
The Senate Commerce Committee has documented that, "At least one company, WellPoint, has already ‘reclassified’ more than half a billion dollars of administrative expenses as medical expenses, and a leading industry analyst recently released a report explaining how the new law gives for-profit insurers a powerful new incentive to ‘MLR shift’ their previously identified administrative expenses."
The ACA standard for including expenditures for non-clinical care as a medical expense (that is, in the numerator) is that it must "improve health care quality." It’s hard to imagine this test will be met by the few occasions of insurance companies’ co-sponsoring visible public health events, nor do they justify skewing the MLR in ways that would raise premiums, or requiring the additional administrative effort to determine whether or not it is in itself an administrative or medical expense.
In our letter to the HHS and NAIC, the EQUAL Health Network urged, "The NAIC and HHS should discourage efforts by insurance companies to create and benefit from insubstantial programs that masquerade as clinical treatments. These programs should be properly counted as the administrative expenses that they are. Otherwise, a proliferation of such programs, if regarded as clinical care, would have the exact opposite of the intended effect of the measure: it would cause health care expenditures to balloon, and dilute value for consumers."
What About Their Investments?
The ACA standard applies only to insurers' premium revenues. Yet patients and payors should be equally concerned about how an insurer uses income from its investment of the sums it extracted from previous years’ patient premiums. A more appropriate standard would measure the share of insurers' total revenues devoted to care, as some analysts have urged.
NAIC committees have been working largely outside of the public’s view to draft standards. In our letter, the EQUAL Health Network urged, "It is vital that rate review and other pressures be strong enough to prevent insurers from simply raising premiums in order to offset the limit on their administration/profit share. It will also be important to create an ongoing public process to set and review the initial regulations which are required to begin in September, 2010. Public comment on this system's achievements and limitations will provide assessments of the system's success, and offer the groundwork for constructive and equitable adjustments to the rules."
Starting in September, health insurance plans are required to spend at least 80-85% of the premium we pay them on actual health care. Executive bonuses, administration, marketing and profits are limited to the other 15% (in large plans) to 20% (in small plans). This is supposed to incentivize the insurance industry to operate efficiently and to negotiate assertively with health care providers. rather than simply passing on cost increases to consumers.
The $2.5 trillion dollar question is this: how do you define actual health care? The Secretary of Health and Human Services defines this figure, known as the Medical Loss Ratio (MLR), after consulting with the NAIC. And the insurance industry has not been shy.
The insurance industry is asking the NAIC to define the MLR to its advantage, by counting marketing programs, including those with public health themes, as medical expenses, rather than the administrative expenses they clearly are.
The aims of the relevant section of the law (Sec. 2718) - low cost care that offers value to consumers – conflict with the financial imperatives of the health insurance industry, to maximize profits and returns to shareholders, as well as administration, including executive compensation. Proposals by the insurance industry call for calculating the MLR in a way that will frustrate the aims of the law. The MLR is a ratio, with all medical claims (in the numerator), divided by total premiums (in the denominator). A high MLR means that the insurance company is spending a relatively higher share of premium income on its members' medical care and less for administration and profit. A low MLR means that the insurance company is returning less in medical care benefits to its members while retaining more for executives and shareholders; this can also signal a solid opportunity for investors.
To fairly achieve an 85% MLR, a company would have to show that the amount spent on medical claims (in the numerator) is high relative to premiums. But companies can frustrate the intent of the law by defining medical claims to include other expenses, including expenses typically considered part of administration.
The Senate Commerce Committee has documented that, "At least one company, WellPoint, has already ‘reclassified’ more than half a billion dollars of administrative expenses as medical expenses, and a leading industry analyst recently released a report explaining how the new law gives for-profit insurers a powerful new incentive to ‘MLR shift’ their previously identified administrative expenses."
The ACA standard for including expenditures for non-clinical care as a medical expense (that is, in the numerator) is that it must "improve health care quality." It’s hard to imagine this test will be met by the few occasions of insurance companies’ co-sponsoring visible public health events, nor do they justify skewing the MLR in ways that would raise premiums, or requiring the additional administrative effort to determine whether or not it is in itself an administrative or medical expense.
In our letter to the HHS and NAIC, the EQUAL Health Network urged, "The NAIC and HHS should discourage efforts by insurance companies to create and benefit from insubstantial programs that masquerade as clinical treatments. These programs should be properly counted as the administrative expenses that they are. Otherwise, a proliferation of such programs, if regarded as clinical care, would have the exact opposite of the intended effect of the measure: it would cause health care expenditures to balloon, and dilute value for consumers."
What About Their Investments?
The ACA standard applies only to insurers' premium revenues. Yet patients and payors should be equally concerned about how an insurer uses income from its investment of the sums it extracted from previous years’ patient premiums. A more appropriate standard would measure the share of insurers' total revenues devoted to care, as some analysts have urged.
NAIC committees have been working largely outside of the public’s view to draft standards. In our letter, the EQUAL Health Network urged, "It is vital that rate review and other pressures be strong enough to prevent insurers from simply raising premiums in order to offset the limit on their administration/profit share. It will also be important to create an ongoing public process to set and review the initial regulations which are required to begin in September, 2010. Public comment on this system's achievements and limitations will provide assessments of the system's success, and offer the groundwork for constructive and equitable adjustments to the rules."
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