Thursday, October 7, 2010

Affordable Care Act. No Time For Amateurs. Shenanigans Inevitable.

The Obama Administration is dealing with the many unintended consequences of the Affordable Care Act's (ACA) medical loss ratio (MLR) limits. As readers may recall, setting the MLR at least 80% to 85% was intended to assure that 80% to 85% of the insurance premium was dedicated to paying for medical services. That limited commercial insurers' administrative expenses to 15% to 20%.

Things are not going quite as intended, reports Reed Abelson in an informative article published in The New York Times. A surprising number of health insurers have asked to have that MLR requirement waived by HHS and there may be more on the way. The good news is that the Administration is applying the "special circumstances" granted to it under the ACA to permit waivers if there could be significant market disruptions. While the White House clearly hopes that much of the market turmoil is a function of transitioning between now and 2014, there is the specter that some insurers will be unable to continue in certain markets, period.

All well and fine says the DMCB. The ACA is the law of the land and the Administration is doing what it needs to do on a case-by-case basis. It has only two concerns:

1) The DMCB heard from an NAIC official that the persons in the Obama Administration with all that authority over the waivers are still on a steep health insurance learning curve. In particular, there was a scary anecdote that when news of insurer exits from the "child only" market hit, officials couldn't quite grasp what a death spiral was all about. This is no time for amateurs.

2) It will be very difficult for well-connected lobbyists, insurers and politicians to resist seeking waivers, less on the merits of "insurance" and more on the basis of connections, pull and relationships. The ACA apparently grants huge "special circumstances" power to HHS and the likelihood of shenanigans, given the government's track record, is high. It may even be inevitable.

The DMCB hopes the two concerns are overblown. If not, you read it here first.

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