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Sunday, December 13, 2009

Sens. Franken & Rockefeller Lead Reform to Force Insurers to pay 90% of premiums on health care

By Wendell Potter, CMD's Senior Fellow on Health Care
Posted: December 6, 2009 07:33 PM
Huffington Post

The Insurance Industry's Lethal Bottom Line -- and a Solution From Sens. Franken and Rockefeller


There was a time, in the early 1990s, when health insurance companies devoted more than 95 cents out of every premium dollar to paying doctors and hospitals for taking care of their members.
No more. Since President Bill Clinton's health reform plan died 15 years ago, the health insurance industry has come to be dominated by a handful of insurance companies that answer to Wall Street investors, and they have changed that basic math.
Today, insurers only pay about 81 cents of each premium dollar on actual medical care.
The rest is consumed by rising profits, grotesque executive salaries, huge administrative expenses, the cost of weeding out people with pre-existing conditions and claims review designed to wear out patients with denials and disapprovals of the care they need the most.

This equation is known as the medical loss ratio (MLR), an aptly named figure that is widely seen by investors as the most important gauge of an insurance company's current and future profitability. In a private health insurance industry that collected $817 billion this year, a 14 percentage point difference in the MLR represents $112 billion a year! Over 10 years, that would be more than enough to pay for health reform.

Thanks to the efforts of several senators who pushed for a minimum MLR to be included in reform legislation, the current Senate bill requires insurers to provide an annual rebate to each enrollee if non-claims costs exceed 20% in the group market and 25% in the individual market.

Sen. Al Franken (D-Minn.) is now leading a group including Sens. Jay Rockefeller (D-W. Va.) and Blanche Lincoln (D-Ark.) to introduce an amendment that would go further by requiring that 90 percent of the money consumers spend on health insurance premiums go directly to health care costs.

Continue reading here.

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