August 26, 2011
Re: Adjustment to Medical Loss Ratios in Missouri
Good morning. My name is Joan Bray. I am the chair of the board of the Consumers Council of Missouri. Thank you for the opportunity to present testimony this morning.
The Consumers Council of Missouri (CCM) was organized to educate andempower consumers statewide and to advocate for their interests. Health insurance is one of the areas in which we work. Health insurance is one of the most stressful items in a household budget. Many individuals and families have no health insurance because it is too expensive. Many who pay health insurance premiums are under-insured and when they need to use the insurance it may not cover their needs. And people who are covered by health insurance often find it difficult to know what their premiums are buying or to know the value of the money they are spending.
The Consumers Council believes purchasers of health insurance should know what their options are, what they are buying and the comparative value of the health insurance products. For too long the industry has been veiled in mysterious and dense language and complex numbers and calculations. This veil must be removed. Terms of the agreement between insurer and insured must be presented in clear and transparent layperson language.
The new Medical Loss Ratio requirements (MLR) are a step toward accomplishing such a goal. They give consumers a straightforward calculation of how their premium dollars are spent by setting a minimum level of spending on medical benefits and quality improvement at 80 percent in the individual and small group markets. Congress, with the support of the Congressional Budget Office, concluded that efficient insurers could achieve an 80 percent minimum MLR in the individual market. However, HHS may grant an adjustment to the 80 percent MLR over the next few years if a state demonstrates that there is a “reasonable likelihood” that application of the requirement “may destabilize the individual market in the state” and that “harm to consumers, will occur.”
The department has asked for public comment on whether Missouri should request an adjustment to the MLR for the individual market in the state. The Missouri Consumer Council says no. We are unaware of enough evidence that would support a request for an adjustment of the 80 percent MLR at this time.
In April of this year, the department prepared and has now posted on its website MLR estimates for each insurer in the individual, small group and large group market. Consumers Council commends the department for making this information available. I do believe, however, that more progress needs to be made in presenting the data in clear and transparent layperson language.
The department’s report shows that 7 of the 17 insurers in the individual market subject to the 80 percent MLR requirement met or came close to that mark. These insurers’ adjusted MLRs, as reported by the department, ranged from 77.2 percent to 97.4 percent. However, the department’s data do not show historical trends, nor does the department provide any explanation of why other insurers did not meet the 80 percent goal or how difficult it would be for other insurers to comply or pay rebates to consumers.
The department needs more information before it – or anyone — can assess the impact of the 80 percent MLR on Missouri’s individual market. The information that the department needs to monitor the impact of the MLR is information that consumers need to make more informed choices about their health insurance. It is also information that HHS indicates should be included in a state’s analysis.
HHS has specified that states seeking an adjustment of the 80 percent MLR in the individual market are to submit information about the MLRs for each insurer. In addition, HHS also asks states to provide:
- For each issuer who offers coverage in the individual market in the state the number of individual enrollees by insurance product and individual premium data by product;
- Total agents’ and brokers’ commission expenses on individual health insurance products;
- Estimated rebates for those insurers who do not meet the 80 percent MLR;
- Net underwriting profit for the individual market business and consolidated business in the state for each insurer and their after-tax profit and profit margin for the individual market business and consolidated business in the state; and their risk-based capital level.
Information about profits and capital reserves provides a clearer picture of where our premium dollars are going. It may be that the companies that fall below the 80 percent MLR are making exorbitant profits rather than using our premium dollars to pay for medical care. The data the department has published comparing MLR across carriers, tells part of the story. We need the rest.
The Consumers Council supports transparency and accountability. We support the department’s effort to learn more about how carriers in the individual market are spending premium dollars and to make that information public.
We urge you issue another public report that compares the profits and capital levels of all health insurers in Missouri, but particularly those in the individual market as part of the department’s due diligence in determining the likely impact of the 80 percent MLR on Missouri’s individual market. Until the data are made available and the public has an opportunity to comment, we believe it is premature for Missouri to request an adjustment of the 80 percent MLR rule.
