HR3200 Sec 116: Golden Bullet? or Smoking Gun?

by Bruce WebbOn Sunday the CBO free a letter addressed to Rep. Dave Camp, the Ranking Member on Ways and Means, which among previous things measured the impact of HR3200 (the House Tri-Committee Health Care Affordability bill) and a public alternative on employer covered insurance. On net it turns out that they project additional people on employer waged cover than current law. Additional Information Regarding the Effects of Specifications in the America’s Affordable Health Choices Act Pertaining to Health Insurance CoverageI give the link for anyone who wants to explore some of those issues. But in this post I want to explore one stipulation that seems to have contributed to this outcome. Now there has been much wailing and gnashing of teeth among the Single Payer Now! contingent that HR3200 with otherwise without a public alternative just is a enormous bonus to the private cover companies by providing them with a individual mandate that delivers millions of new customers without cost controls with the end result that cover companies will just cherry pick their way to billions in profits. Now if they would have paused for a second to wonder why people like Kennedy and Waxman would just sell them out this way they might have been tempted to examine the bill language. But since there was negative such pause I guess I will have to step in. So in re-examining the bill the past I came crossways this section whose import I had kind of missed before.http://edlabor.house.gov/documents/111/pdf/publications/AAHCA-BillText-071409.pdf pg. 24-25SEC. 116. ENSURING VALUE AND LOWER PREMIUMS. (a) IN GENERAL.â€"A fit physical condition benefits plan shall meet a medical loss relation as defined by the Commissioner. For any plan year in which the fit physical condition benefits plan does not meet such medical loss ratio, QHBP offering entity shall give in a manner specified by the Commissioner for rebates to enrollees of payment enough to meet such loss ratio. (b) BUILDING ON INTERIM RULES.â€"In implementing subsection (a), the Commissioner shall build on the definition and method urbanized by the Secretary of Health and Human Services under the amendments complete by section 161 for determining how to work out the medical loss ratio. Such method shall be set at the uppermost level medical loss relation possible that is intended to make sure adequate participation by QHBP offering entities, competition in the physical condition cover market in and out of the Health Insurance Exchange, and value for consumers consequently that their premiums are second-hand for services. Why is this the Golden Bullet for those of us pushing the Public Option? And why contrawise is it reason for the cover companies to go ballistic? Well a little discussion of that under the fold.This provision, if implemented correctly, almost completely strips the ability of cover companies to combine cherry picking and premium increases to continue the enormous profits they garner today. What it does is to establish a minimum 'medical loss ratio' which in simpler terms means a set relation of care in fact waged for to premiums collected. If by whatever means whether that be gaming the risk pool consequently an to only cover people unlikely to make claims otherwise by denying coverage to insurees on a case by case foundation your medical loss relation drops below an recognized level the cover company has to rebate the difference. In practice this prevents cover companies from just arbitrarily jacking up rates and simultaneously takes the profit out of cherry-picking the risk pool. In a express this Sec automatically limits profits by establishing indirect price controls. Which is not going to make the cover industry happy.To see how this works. Under HR3200 Sec 111 bans limitations based on pre-existing conditions, Sec 114 mandates equal coverage for mental physical condition and substance abuse treatment (p. 23), Sec 113 establishes strict limits on altering premiums crossways the risk pool (p.21), while section 112 guarantees enrollment and renewal, i.e. negative additional canceling people who in fact dare to claim coverage for getting seriously ill. Now cynics can and do argue that cover companies are extraordinarily accomplished in working their way around these kind of restrictions and this is true enough. On the previous hand the better they are at ducking the requirements of Secs 111-114 the additional exposed they are to our Sec 116.Lets say you have a company that against all law and regulation manages to have a plan that only in practice enrolls healthy adults old 25-35 who hardly ever if ever use much physical condition care. Under the current system this result yields ideal profits with collections but negative payouts. Under Sec 116 your profits would be limited to the medical loss ratio. The answer for the cover companies is to make up the difference with volume, the incentives are there to give cover as opposed to denying it.Sec 116 would not eliminate all gaming as companies would still have an advantage if they shift their very high cost insurees over to the public option. But from the perspective of the administration these are exactly the pool of people likely to end up on medicaid otherwise qualifying for Medicare under Social Security disability anyway, for them the Public Option might just be a way station while they wait to qualify for DI.What does this have to do with the CBO Report cited? Well Sec 116 prevents the Public Option from sketch too much of the overall pool away from the private plans not since it doesn't have the ability to undercut them on cost, but since it armed forces them to compete for their share of the overall pool otherwise risk seeing their gross profits squeezed.I am still annoying to work out in my head where the limits are here, and where the sweet spot for assessment the dimension of your coverage pool vs level of care the company ends up having to pay, but on a top down look it seems like cover companies under something close to HR3200 end up creation money by insuring people and not by denying coverage in whole otherwise in part. It transforms the industry into a straight service industry from its current predatory model.Sec 116: Golden Bullet for coverage, Smoking Gun for profits. It just depends which side of the divide you come down on.
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