Last month, I wrote about how new restrictions on health insurance “medical loss ratios”—the proportion of medical expenses paid out to premium revenue received—could destabilize the insurance market. It turns out that the state insurance commissioners forced to implement Obamacare are worried about the same thing.
On April 12, Health and Human Services Secretary Kathleen Sebelius wrote a letter to the National Association of Insurance Commissioners, asking them to give her their feedback as to how to implement the MLR restrictions. She gave them a deadline of June 1 to get back to her. Well, June 1 has come and gone, and the NAIC has been unable to meet the deadline:
We will unfortunately not be able to complete it by June 1st as you have requested. We certainly appreciate the need to complete this project as soon as possible – waiting until the deadline of December 31, 2010 in the law is not an option – but we also appreciate, as you do, how critically important it is to do this right. The medical loss ratio and rebate program in PPACA have the potential to destabilize the marketplace and significantly limit consumer choices if the definitions and calculations are too restrictive.It’s a good sign that the NAIC recognizes the risks of overzealous MLR regulation, and that they are taking the time to make sound recommendations. Their letter shatters the cartoonish illusion that punitive restrictions on insurance companies will benefit consumers.
But remember that the democratically elected insurance commissioners, who represent the views of all 50 states, are more philosophically diverse than the White House is. At the end of the day, the final decisions will rest with Sebelius. Will she do the right thing for consumers, by undermining a key plank of Obamacare? Or will she do the political thing, undermining the stability of the insurance market?