The President signed the health care reform bill in March, but over $125 million in lobbying dollars continues to flow to the issue, lobbying disclosure forms show. Total dollars spent lobbying on health care issues remained high in the three months after the reform bill was passed, dipping by only $16 million since the first quarter of the year.
State insurance commissioners are currently working out the details that will shape one of the first regulatory battles of health care reform: what percent of premiums health insurers must spend on patient care. And the health care industry is taking note. In the second quarter of 2010, more than 40 organizations lobbied Congress, the White House and the Department of Health and Human Services on this issue.
The new law requires large insurance plans to spend a minimum of 85 cents of every dollar on medical care, as opposed to administrative and other costs, such as advertising, employee salaries and profit. Small group and individual plans must meet a lower standard – 80 cents on the dollar. It's called the "medical loss ratio" in industry jargon.
While the basic rates were set by the law, the details that are currently being worked out can have a significant effect on insurance companies' bottom lines. At issue is how liberally to interpret the concept of patient care. For example, will fraud detection efforts be considered patient care? How about nurse hotlines? Which federal taxes will insurers be allowed to deduct from their revenues, thus boosting their numbers?
Lobbying disclosure forms often list dozens of issues, so it is difficult to parse out how much was spent on an individual provision. But over $10 million was reported last quarter on forms that list the medical loss ratio as at least one of the issues discussed.
Groups that lobbied ranged from large health insurers to physicians' and hospital groups and online plan brokers; industry groups vastly outnumbered consumer advocacy groups. Out of the 41 groups that lobbied on medical loss ratios and the health care reform bill, only two were patient advocacy groups.
Among the most aggressive in its lobbying efforts was WellPoint, the second largest health insurance company in the nation according to Fortune Magazine. Last quarter, WellPoint spent $1.25 million lobbying on health issues, down only slightly from $1.5 million in the first three months of the year. During that same period, WellPoint's own overall medical loss ratio was 82.9 percent – that is, 82.9 cents of every patient dollar were spent on medical care.
WellPoint was the center of a storm of protest earlier this year when a division of the company proposed 30 to 39 percent rate hikes in California, shortly after the insurer posted an increase in profits of over 700 percent. That windfall was largely due to the sale of a subsidiary, but nonetheless drew criticism from consumer advocates as well as investigations by federal and state oversight groups in the wake of the proposed rate hikes.
Based on 2009 numbers, it looks as though insurers will have the toughest time bringing their individual plans up to par. Last year, according to a Senate Commerce Committee analysis, the average individual plan at the six largest for-profit companies had a medical loss ratio of 73.6 percent. Small and large-group plans, on average, just barely met the new minimums.
Among WellPoint's subsidiaries, the numbers vary widely. Anthem Health Plans of Maine was sitting pretty last year at 95.2 percent for their individual plans. But elsewhere, WellPoint subsidiaries fell far short of the new requirements: the New Hampshire Anthem group came in at 62.9 percent last year for individual plans and the Virginia Anthem group posted a 66.6 percent medical loss ratio in their small-group plan.
If insurers can't make the minimum medical loss ratios, they'll have to refund a portion of premiums to patients. Health Care for America Now (HCAN), a liberal nonprofit that supported health care reform, estimates that if the new rule had been in place in 2009, the six largest for-profit health insurance companies would have had to return $1.9 billion to customers.
Other large insurers posted lower overall ratios than WellPoint but report fewer lobbying dollars flowing toward the issue. United Health Group, the country's largest managed-care company, posted an overall ratio of 81.5 percent last quarter. That company spent $920,000 on health care lobbying during that period.
On August 17, state regulators in the National Association of Insurance Commissioners took a first step toward interpreting the rule, approving a new form that insurers will use to report their ratios. The commissioners will issue their final report in the fall, which will be subject to Health and Human Services Department approval. The concept of holding insurance companies to a minimum on patient care isn't new. Several states currently implement their own medical loss ratio minimums, ranging from the lax, such as North Dakota's 55 percent requirement for individual plans to the more stringent, such as Colorado's 85 percent minimum for policies with more than 50 holders.
Industry representatives contend that using a narrow definition of patient care hampers their ability to detect fraud, improve record-keeping technology and may send some insurers out of business. As a consultant to the health care industry told the Wall Street Journal earlier this year, the new standards won't necessarily help rein in costs, either. Bob Laszewski, president of Health Policy and Strategy Associates, told CNN in May that "the easiest way to have a high medical loss ratio is to let your medical costs soar," thus balancing out high administrative costs.