December 17, 2011 08:33 PM UTC

Mike Coffman Loves Him Some Health Insurance Profits

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• by: Colorado Pols

Here’s a news release from earlier this month from the Department of Health and Human Services, announcing the scheduled implementation of an important provision of the Patient Protection and Affordable Care Act (so much easier to just call it “Obamacare”):

Today, the Centers for Medicare & Medicaid Services (CMS) issued a final regulation that will ensure health insurance companies spend at least 80 percent of consumers’ health insurance premiums on medical care, not income, overhead and marketing. Insurance companies that fail to meet the new standard are required to provide a rebate to consumers.

Known as the Medical Loss Ratio (MLR), this rule provides unprecedented transparency and accountability of health insurance companies for customers. Created by the Affordable Care Act, the MLR requirements provide protection and value to approximately 74.8 million insured Americans. Estimates from last year indicate that, starting in 2012, up to nine million Americans could receive rebates worth from $0.6 to $1.4 billion. However, early reports suggest insurers lowered premium growth rather than face the prospect of providing rebates – a win-win for consumers.

“Under the Affordable Care Act, consumers are already seeing better value from their health insurance companies,” said CMS Acting Administrator Marilyn Tavenner. “If your insurance company doesn’t spend enough of your premium dollars on medical care or quality improvement this year, they’ll have to give you rebates next year. This will bring costs down and give insurance companies the incentive to focus on what matters for patients – high quality health care.”

Sounds pretty good, right? Not if you’re Rep. Mike Coffman of Colorado, who issued his own press release yesterday:

House Small Business Investigations, Oversight and Regulations Subcommittee Chairman Mike Coffman (R-CO) today held a subcommittee hearing to examine new Patient Protection and Affordable Care Act’s (PPACA) Medical Loss Ratio (MLR) and its effect on job creation. Some have argued that the MLR requirements will ensure that customers receive the most value for their premium dollars. However, insurance agents, [Pols emphasis] many of whom are small business owners and whose customers are often small businesses, believe that the MLR requirements may lead to lower levels of customer service and consolidation in the industry– which will result in job loss…

“President Obama claims the new healthcare reform law will decrease healthcare costs for Americans,” said Coffman. “However, the new Medical Loss Ratio included in the law may have the opposite effect by forcing insurers to increase– not decrease– premiums, because insurers will be discouraged from investing in administrative services, such as anti-fraud or anti-waste services, that could save consumers money. On top of this, the MLR may have a domino effect on small insurers by deterring many from entering the market, cutting the wages of current insurance brokers or forcing them out of business.

“The MLR is bad policy and bad for small business. With over 13 million Americans still unemployed and our economy still wavering, any law that comes from Washington should be facilitating growth– not increasing prices on consumers or killing jobs like the MLR will do.”

We haven’t seen any numbers yet for the effect the new medical loss ratio (MLR) rules will have on Colorado’s health insurance market, but the Miami Herald said yesterday that in Florida, “large numbers” of insured residents could be getting premium rebates from insurers do not comply with the 80-20 ratio of healthcare expenses to overhead.

Politically, once again especially for Rep. Coffman in his new hotly competitive district, opposing the medical loss ratio requirement in “Obamacare” makes very little sense. This component of healthcare reform is one of the more popular aspects of the new law in polls that actually break down what it does. The arguments against it are kind of stilted, essentially boiling down to fewer insurance agents due to less commission earned on sales–a “problem” that many other parts of the reform law address, such as state-based health insurance exchanges.

And we have to say, the health insurance brokerage industry is a terribly small constituency in CD-6 to focus your time on compared to health insurance consumers.