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I've been saying that Medicare supplements will not be immune to what the socialists have done to health insurance. If this bill passes the "takeover" will be closer to complete.
Thanks to Ron Iverson at index for keeping us informed about this.
Rick
New Medigap Bill Offers Questionable Benefits
Jul 27 Posted by Administrator in Medicare Supplement
Yesterday, amid debt ceiling stonewalling, a bill called the Medigap Medical Loss Ratio Improvement Act was introduced to Congress. The bill increases Medicare Supplement minimum loss ratio (“MLR”) requirements to 80% for the individual market and 85% for the group market. This bill will make Med Supp MLR’s consistent with other products in the recent healthcare reform law. The benefits of this bill are questionable and may lead to unintended negative consequences.
According to the 2010 NAIC Medicare Supplement experience exhibit, carriers are already experiencing a 79% loss ratio on these plans. It would appear, in aggregate, that market forces have already driven carriers to price with much higher loss ratios than is required by current regulations. The Medigap bill will force small to medium size companies to drive down expenses to compete with larger companies, who would see their competitive advantage grow. Agent compensation is the most likely source of expense reduction, which leads to question how Medicare Supplement will be distributed in the future. This also presents a question around implementation—does the bill apply to new business only or to in-force plans as well? This change could also drive companies to increase their offerings of “other” supplemental type products not subject to the higher MLR requirements.
Overall, we believe the Medicare Supplement market could adapt to this change; however, it would have a major impact on many of the market’s participants. We do expect AHIP to weigh in with Congress on the value created by these plans and the unintended negative consequences of implementing these proposed changes.
That article provided a link to the Kerry Press Release. It follows.
Sen. Kerry, Rep. Stark Introduce Bill to Provide Medicare Beneficiaries Better Value for Their Medigap Premium Dollars
Extends Health Reform Medical Loss Ratios to Medigap Insurers
For Immediate Release: Tuesday, July 26, 2011
WASHINGTON – Today, Sen. John Kerry (D-MA) and Rep. Pete Stark (D-CA) introduced the Medigap Medical Loss Ratio Improvement Act. The legislation improves consumer protections in the Medigap marketplace by raising the minimum percentage of premium dollars that must go toward medical care, not executive compensation or administrative costs. This percentage is called the medical loss ratio (MLR).
“We want premium dollars going towards better care for patients and the system will be stronger when they do,” said Sen. Kerry. “This commonsense bill provides another layer of protection for our seniors.”
“Americans have long paid to line the pockets of insurance executives with their premium dollars,” said Rep. Stark. “Health reform pushes back by ensuring that consumers get improved value for their premium dollars through strong medical loss ratio standards for private health insurers and Medicare Advantage plans. Our legislation builds on those reforms by extending the same standards to Medigap plans."
Under current law, Medigap insurers are required to meet an MLR of only 65 percent in the individual marketplace and 75 percent in the group market. These percentages date back to the original enactment of Medigap insurance standards in 1990. The Medigap Medical Loss Ratio Improvement Act would require Medigap insurance plans to spend at least 85 percent of every premium dollar on medical care in the group market and 80 percent in the individual market. To give insurers time to prepare for this change, it would become effective in 2014.
More than 9 million Medicare beneficiaries purchase private supplemental Medigap policies to help cover cost sharing and deductibles in traditional Medicare.
"Medigap plans help people fill in the gaps of Medicare cost sharing, but often have very high administrative overhead," said Rep. Henry Waxman, Ranking Member on the Committee on Energy and Commerce. "This legislation will help people enrolled in Medigap get a good value from those health insurers."
"This important bill will provide seniors in Medigap with consumer protections like those already in place for Medicare Advantage enrollees," said Rep. Frank Pallone, Ranking Member on the Energy and Commerce Health Subcommittee. "More than 9 million Medicare beneficiaries have Medigap policies and their premium dollars should be spent on medical care."
This legislation has been endorsed by the National Council on Aging, Families USA, AFSCME, the Alliance for Retired Americans, the Center for Medicare Advocacy, Health Care for America Now, AARP, the National Senior Citizens Law Center, Community Catalyst, and the Medicare Rights Center.
PRESS RELEASE: Stark, Kerry Introduce Bill to Provide Medicare Beneficiaries Better Value for Their Medigap Premium Dollars
Thanks to Ron Iverson at index for keeping us informed about this.
Rick
New Medigap Bill Offers Questionable Benefits
Jul 27 Posted by Administrator in Medicare Supplement
Yesterday, amid debt ceiling stonewalling, a bill called the Medigap Medical Loss Ratio Improvement Act was introduced to Congress. The bill increases Medicare Supplement minimum loss ratio (“MLR”) requirements to 80% for the individual market and 85% for the group market. This bill will make Med Supp MLR’s consistent with other products in the recent healthcare reform law. The benefits of this bill are questionable and may lead to unintended negative consequences.
According to the 2010 NAIC Medicare Supplement experience exhibit, carriers are already experiencing a 79% loss ratio on these plans. It would appear, in aggregate, that market forces have already driven carriers to price with much higher loss ratios than is required by current regulations. The Medigap bill will force small to medium size companies to drive down expenses to compete with larger companies, who would see their competitive advantage grow. Agent compensation is the most likely source of expense reduction, which leads to question how Medicare Supplement will be distributed in the future. This also presents a question around implementation—does the bill apply to new business only or to in-force plans as well? This change could also drive companies to increase their offerings of “other” supplemental type products not subject to the higher MLR requirements.
Overall, we believe the Medicare Supplement market could adapt to this change; however, it would have a major impact on many of the market’s participants. We do expect AHIP to weigh in with Congress on the value created by these plans and the unintended negative consequences of implementing these proposed changes.
That article provided a link to the Kerry Press Release. It follows.
Sen. Kerry, Rep. Stark Introduce Bill to Provide Medicare Beneficiaries Better Value for Their Medigap Premium Dollars
Extends Health Reform Medical Loss Ratios to Medigap Insurers
For Immediate Release: Tuesday, July 26, 2011
WASHINGTON – Today, Sen. John Kerry (D-MA) and Rep. Pete Stark (D-CA) introduced the Medigap Medical Loss Ratio Improvement Act. The legislation improves consumer protections in the Medigap marketplace by raising the minimum percentage of premium dollars that must go toward medical care, not executive compensation or administrative costs. This percentage is called the medical loss ratio (MLR).
“We want premium dollars going towards better care for patients and the system will be stronger when they do,” said Sen. Kerry. “This commonsense bill provides another layer of protection for our seniors.”
“Americans have long paid to line the pockets of insurance executives with their premium dollars,” said Rep. Stark. “Health reform pushes back by ensuring that consumers get improved value for their premium dollars through strong medical loss ratio standards for private health insurers and Medicare Advantage plans. Our legislation builds on those reforms by extending the same standards to Medigap plans."
Under current law, Medigap insurers are required to meet an MLR of only 65 percent in the individual marketplace and 75 percent in the group market. These percentages date back to the original enactment of Medigap insurance standards in 1990. The Medigap Medical Loss Ratio Improvement Act would require Medigap insurance plans to spend at least 85 percent of every premium dollar on medical care in the group market and 80 percent in the individual market. To give insurers time to prepare for this change, it would become effective in 2014.
More than 9 million Medicare beneficiaries purchase private supplemental Medigap policies to help cover cost sharing and deductibles in traditional Medicare.
"Medigap plans help people fill in the gaps of Medicare cost sharing, but often have very high administrative overhead," said Rep. Henry Waxman, Ranking Member on the Committee on Energy and Commerce. "This legislation will help people enrolled in Medigap get a good value from those health insurers."
"This important bill will provide seniors in Medigap with consumer protections like those already in place for Medicare Advantage enrollees," said Rep. Frank Pallone, Ranking Member on the Energy and Commerce Health Subcommittee. "More than 9 million Medicare beneficiaries have Medigap policies and their premium dollars should be spent on medical care."
This legislation has been endorsed by the National Council on Aging, Families USA, AFSCME, the Alliance for Retired Americans, the Center for Medicare Advocacy, Health Care for America Now, AARP, the National Senior Citizens Law Center, Community Catalyst, and the Medicare Rights Center.
PRESS RELEASE: Stark, Kerry Introduce Bill to Provide Medicare Beneficiaries Better Value for Their Medigap Premium Dollars