Saturday, September 26, 2009

The least known, most important section in HR3200

Over at Angry Bear I have a whole series of posts relating to HR3200, the American Affordable Health Care Act or AAHCA otherwise known as the Tri-Committee Bill. The following is a comment I posted to a MyDD diary today in response to complaints that the health care bills under consideration don't have meaningful cost controls. While this is true enough for the Baucus Bill currently being marked up, it really is not true for HR3200. The response here is posted unchanged.

The House Tri-Committee Bill has some excellent price control measures and you can bet a lot of the jostling around the Senate Finance Bill is the insurance companies jostling a way to keep the employer and individual mandates while ditching Secs 111-116. And especially 116.

Sec 111 Prohibiting Pre-Existing Condition Exclusions
Sec 112 Guaranteed Issue and Renewal
The can't turn anyone not covered by employer insurance from a individual plan, nor refuse to renew it. No matter what your pre-existing condition or what illness you develop. And no rescissions based on forgetting that case of acne when you were 14.

Sec 113 Insurance Rating Rules
2nd most important provision. No individual or business can be charged more than any other one in your area. Small businesses don't have to negotiate prices or worry about hiring someone who may become sick or pregnant. Under HR3200 all those are total non-issues. Besides area the ONLY criteria on which premiums vary is age, and that restricted to a 2:1 ratio, and family composition (insurance companies can charge families more than an individual but only within limits).

This is HUGE. If you are a 'smaller' or 'smallest' employer you just enroll through the Exchange at the same price per individual and family employee as any other Exchange participant. You can not be discriminated against even if you hired an employee on thrice weekly dialysis, or just coming off cancer treatment.


But here is the biggee, the single provision that guts the insurance companies current predatory model, the one you can bet they are most eager to kill. It is deliberately written to be innocuous but does more to control costs and insurance pool gaming than any other.

(a) IN GENERAL.--A qualified health benefits plan shall meet a medical loss ratio as defined by the Commissioner. For any plan year in which the qualified health benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment sufficient to meet such loss ratio.

Under the current model insurance companies make money in two ways. One by insuring people who likely won't need are and two by denying care to those who do need it. Their stated goal is to reduce their Medical Loss Ratio to as low a number as they can. Under Sec 116 this doesn't work, the more successful you are at denying care or insuring people who don't need it the bigger the rebate check has to be.

The key is getting the target MLR set at the right level, which is where the PO comes in, its MLR effectively establishes the level against which the private plans have to compete and so keeps the insurance company from gaming the Commissioner in an attempt to get a lower MLR (equals higher profits and dollars for exec compensation). But if pushed to the wall you could control insurance companies premium increases simply through strict application of the provisions of Sec 116.

Sec 116 = Premium and Profit Control. It is even more key to the long-term success of health care reform than the PO itself. As is Sec 113. For example in the Baucus Bill the age ratio is 5:1 plus a tobacco provision that could mean a 55 year old smoker could be paying up to 7.5X more than a young non-smoker.

(And yes people shouldn't smoke. But people our age remember when cigarettes came with no warnings, were advertised everywhere, and the tobacco companies were spending millions that there was no proven link between cigarettes and anything. Think of the Climate Change Deniers of today. Penalizing some middle age guy because he fell afoul of a campaign of lies 40 years ago is a little harsh.)

HR3200 is a good bill that does not sell us out to insurance companies. Taken as a whole it would prevent almost all gaming and gouging. Yet people seem to have written it off as if Dingell and Waxman and Rangel and Brown had each spent the last four plus decades figuring out how to screw over progressivism.


jeff said...
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aimai said...

Thanks for this post, Bruce Webb. Very informative and very timely.


Bruce Webb said...

Thanks for visiting. I loved your stuff for years, even before you took down Joke Line at the beach. A thing of beauty.