CBO: Insurance Proposal Would Effectively Nationalize Private Insurance

A Medical Loss Ratio (MLR) is the percentage of premium dollars an insurer spends on claims as opposed to administrative costs and other expenses. According to news reports, a proposal from Senator Rockefeller and others would limit MLRs to 90%. The Reid bill already requires insurers to issue rebates to enrollees on a pro rata basis if its medical loss ratio falls below 80% or lower for the individual and small-group markets or 85% or lower for the large-group market. 

However, the Congressional Budget Office (CBO) says that a 90% MLR would expand “the federal government’s regulatory role in the health insurance market so much that it would make such insurance an essentially governmental program, so that all transactions related to health insurance policies (even those with private companies) should be recorded as cash flows in the federal budget.”  A similar ruling helped kill Hillary Clinton’s health reform proposal 15 years ago.

Donald Marron, former Acting Director of CBO, explains the issue at his blog.

Comments (3)

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  1. Bruce says:

    Let’s hope they require 90% and let’s hope that kills the bill.

  2. Neil H. says:

    It’s really a silly idea to begin with. Government doesn’t dictate to other industries what their administrative costs should be.

  3. hoads says:

    As much as I stand against Obamacare, I actually do support more regulation of health insurers. I don’t understand how this particular mandate of a 90% MLR puts health insurance premiums under the federal budget. Why shouldn’t health insurers be given a “cap” just like what they are proposing for health providers in such things as bundled payments and accountable care organizations?

    Health insurers do nothing but add costs to our healthcare system and I’ve still not seen any analysis as to why it is that healthcare costs have risen roughly 6% over the last decade while health insurance have increased over 12%. And this when computer technology has increased productivity in all sectors of business and finance administration.

    And where are the mandates for health insurance to standardize their claims reimbursement and payment systems? Anyone who has experienced a significant medical incident can vouch for the fact that the process is so entirely antiquated and inefficient that literally no one can make sense of their hospital and medical bills. Instead, unfunded mandates are placed upon medical providers to install EMRs (and again, without specifying technological standards) without any effort to require efficiency in medical payment systems such that we receive one bill per medical incident.

    And, look at administrative costs within our NHE—6% overall yet, physicians’ adminstrative costs are upwards of 30%! Health insurers benefit from a complex claims and administration system that requires physicians to employ huge numbers of administrative personnel who do not provide patient care.

    Health insurance is a racquet and I am outraged that even the Republicans have not pushed to eliminate employer based health insurance which essentially creates “commercial” rates for health insurance anyway. Why shouldn’t health insurance be purchased by individuals just like every other type of insurance? The whole “group pooling” fiasco is a fraud anyway. Health insurers look at their bottom line and do not base their premium increases on a group’s claims history.

    It is no wonder that AHIP has supported Obamacare and I seriously doubt they are too worried about government regulation either. Not when they stand to benefit from politicized medical research that will essentially lower their overall costs by government mandates to create barriers for patients to receive high tech expensive medical care. This is a win win for government and insurance companies at the expense of patients and medical providers.