A Report from “The Battle in Seattle”

Well, I’m back from the National Association of Insurance Commissioners (NAIC) meeting in Seattle!

I went to the NAIC meeting because I am one of the dozen or so consumer representatives who were chosen in March to represent consumers’ interests as that organization works out many of the details of how health care reform will play out. The NAIC increased the numbers of consumer representatives this year because of the central role the NAIC has in writing policies and model regulations for the states and their official advisory role to the federal government in health care reform implementation. They already are lobbied by hundreds of industry representatives, and the commissioners needed the consumer perspective of how the implementation of health care reform.

Our allies at Health Care for America Now! and the Washington Community Action Network were also at the NAIC summer meeting, protesting the lobbyist influence outside the convention center. They passed out packets to the 1600+ attendees consisting of packets of soap, a clothespin, and a facemask to “protect against lobbyist lies” and “disinfect the gathering.”

But the real “Battle in Seattle” actually took place inside the meeting hall among the commissioners who were voting on relatively obsure insurance issues that literally affect all consumers. This “battle” had lots of drama, including strong language, mini-confrontations, and ‘shuttle diplomacy.’ The most contentious issue is the requirement of the new health care reform law that mandates that insurers spend most of the premiums they collect from consumers on actual health care medical expenses. The insurance companies will soon be required to spend a sizeable percentage (80 or 85%) on things like doctor’s fees, hospital care, x-rays, and prescription drugs, and they are resisting this requirement by trying to redefine what is a medical expense. This rule prevents more than 15% or 20% of our money to be spent on CEO salaries, marketing expenses, and other administrative costs. Some insurers object to such restrictions on high salaries and limitations on profits and are struggling to meet these new percentage thresholds. If they are unable to meet these percentages, they will be required to issue rebates to their policyholders. That’s why the industry was present at the NAIC meeting in such large numbers in what even they are characterizing as their attempt to change the rules of the health care reform law; they want to redefine many adminstrative expenses so they can be officially counted as a medical expense.

One of the “battles” involve a particularly vocal and powerful group at the conference advocating in favor of counting the fees paid to brokers and agents as a medical expense. (No, I am not making this up!) While many Americans find the services provided by brokers and agents to be valuable in finding quality, affordable health insurance coverage, companies pay these brokers in California sometimes 20% as a fee for securing the customer’s business. (Some people do not use a broker or agent, but get advice through employers, unions, associations, on internet sites, and from friends and neighbors.) In any event, while many believe there remains a place for the role of the broker/agent in the new health care marketplace, virtually no one can argue with a straight face that a broker fee represents a true medical expense. We believe those fees clearly represent an administrative expense which should not be counted as a medical expense in the new health care world.

The NAIC has held many and lengthy conference calls over the last four months in which industry and consumer representatives argued about what can be construed as a medical expense in order to draft a policy for the commissioners to vote on in Seattle. The brokers and agents pushed furiously for their fees and commissions to be left out of the calculations altogether. The consumer representatives argued that only true medical expenses should be counted toward the requirement that 80-85% of premiums should go toward real health care. Although the policy as written was not a perfect decision and did involve compromises–the consumers’ view prevailed in Seattle.

In addition, the commissioners did pass a resolution affirming the value of brokers and agents which does not have the force of law or regulation nor changes any of the definitions of what counts as a medical expense.

In general, the agreed-upon medical loss ratio definitions followed the recommendations by the staff process that the consumer representatives participated in. Both from good efforts by consumer advocates inside the hall and outside across the country, common sense prevailed and the definitions followed the dictionary rather than the desires of the insurance industry.

Many challenges remain before we can declare victory in this medical loss ratio (MLR) fight. The NAIC still has work to do, and the recommendations will go to the U.S. Department of Health and Human Services (HHS), which will develop final rules that take effect on schedule for 2011 health plans.

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