Consumer Advocates Ask for White House/HHS Probe of Health Insurers' Reduced Medical Care Spending, Even As Premiums Spike

/PRNewswire/ -- Consumer Watchdog and the Center for Media and Democracy today asked the Obama administration to investigate how the major for-profit health insurance companies are reducing their proportion of spending on health care in advance of health reform, even as premiums spike upward. In a letter to Health and Human Services chief Kathleen Sebelius, the groups compared insurers' actions to those of credit card companies, which spiked annual interest rates last year in advance of new federal regulations that would curb corporate abuses.

"Insurance companies appear to be making sure that when new federal rules for spending on health care kick in next year, they can keep their administrative bloat and profits intact," said Judy Dugan, research director of Consumer Watchdog.

The groups noted in the letter that insurance companies are lobbying intensely to distort new rules meant to require increased medical spending -- 80% of premium dollars for individual and small group policies and 85% for large group policies. The insurers seek to redefine billions of dollars in overhead and administration expenses as health care. By cutting their medical ratio now, they can make room for the redefined overhead expenses next year and meet but not exceed the 80% to 85% minimums.

Co-signer Wendell Potter of the Center for Media and Democracy said that red flags went up when Cigna, the last major insurer to report 2nd quarter results, showed a startling 6.4% drop in its medical spending ratio (also called medical loss ratio, or MLR) to 78.8%, a cut that appears unprecedented for a large insurer.

Read the full letter at http://www.consumerwatchdog.org/resources/sebeliusletterCWDCMD081110.pdf

The letter said:

"We write jointly as advocates for consumer rights and transparency to urge you to examine health insurers' reports of reductions in their proportion of medical spending in recent quarters, even as premiums have risen substantially in advance of the new health reform law. The major insurance companies' behavior looks suspiciously like that of credit card companies, which spiked annual interest rates in advance of consumer protection laws intended to restrict the conditions under which rates could go up.

"Like the credit card companies, health insurers assume that they can get away with what amounts to bilking their customers now to set up higher profits in the future. The health insurers appear to be cutting the proportion of premium dollars spent on medical care, in the case of CIGNA by likely record proportions, in advance of regulations intended to make them spend a higher proportion on care, and less on administrative bloat.

"Unlike with credit card companies, you have the power to curb their gaming of the system. The regulations that you put in place to enforce the new health law requirement that they spend 80% to 85% of customers' premium on health care will decide whether the companies cater to Wall Street or to their patients.

"The outcome of the regulations that are now being written will depend on your resistance to a massive lobbying effort by the insurance industry.

"As you know, insurers already expect that changes in the [medical loss ratio] calculation specified in the Patient Protection and Affordable Care Act will allow more insurer activities to be defined as 'health quality improvements' and counted as health care. At least some and possibly all of their state and federal taxes will also be deducted from premium revenue. The combined effect, depending on vagueness or laxness in final regulations, could amount to a 5% or larger insurer 'bonus' in calculating the MLR.

"See Consumer Watchdog comment on tax deduction regulation at http://www.naic.org/committees_lhatf_ahwg.htm

"The result of this bonus is that it pays for an insurer to suppress MLR as much as possible now, to keep future MLR at -- but not above -- 80% for individual and small business policies, and 85% for large groups. It is not possible for the public to accurately determine how the company's drastic reduction in MLR -- which increases its value to Wall Street--was accomplished.

"The Center for Media and Democracy and Consumer Watchdog ask that HHS demand much more detail about the nature of the MLR reductions from CIGNA and lesser reductions by other insurers, and make the results public. The examination should seek to determine if financial coercion of employers and individuals (through unaffordable and unjustifiable spikes in the rates of less profitable plans, or the targeted closure of some plans) was part of any shift to higher-deductible and lower benefit plans.

"HHS should also seek to tighten new definitions of what can be included in the medical loss ratio. The National Association of Insurance Commissioners, which is finalizing proposed regulations to decide how medical loss ratios are defined, is being lobbied by insurers and their lawyers with an intensity that makes the lobbying of Congress pale by comparison. As the proposed regulations are being finalized, they risk being further weakened. It will be up to HHS to right the balance.

"Presumably the MLR reductions at CIGNA and other companies involved what insurers call 'aggressive medical management' to reduce the amount of care provided enrollees. However, it likely also involved the movement of more enrollees into plans that require greater cost sharing and provide less care, through marketing or price coercion."

Insurers and their lobbyists count on the technical detail of financial reports and regulatory actions to mask their intent, said Consumer Watchdog and the Center for Media and Democracy.

Consumers don't notice until their premiums shoot through the roof and their health benefit are reduced. Regulators must resist corporate lobbies and act to protect ordinary citizens, the groups said.

Consumer Watchdog and the Center for Media and Democracy are nonprofit, nonpartisan consumer advocates. For more information, see www.consumerwatchdog.org and www.prwatch.org

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Many Americans Still Confused About New Healthcare Reform Law and its Provisions

/PRNewswire/ -- Not sure what's in--and not in--the new healthcare legislation signed into law by President Barack Obama in March? You're not alone. More than 2,100 adults were given a list of 18 reform items and asked to identify what's included and what's not included in the law. Only four items were correctly identified by the majority of those polled.

Most (58 percent) know that the reform package will prohibit insurers from denying coverage to people because they are already sick; 55 percent know the law permits children to stay on their parents' insurance plan until age 26; and 52 percent realize that people who don't have insurance will be subject to financial penalties. Additionally, half are aware that employers with more than 50 employees will have to offer their workers affordable insurance.

These are some of the major findings of today's HealthDay/Harris Poll, conducted between July 15 to 19, 2010 among 2,104 adults (aged 18 and over).

Among other findings: 82 percent think the bill will result in rationing of health care or that it might (it won't); 79 percent don't know or aren't sure if drug companies will pay an annual fee, (they will); 73 percent don't know the law establishes a new tax on the sale of medical devices; 66 percent don't know or aren't sure if the legislation will result in insurance exchanges where people can shop for insurance, (it will); and 63 percent either aren't sure or don't know if the new law will increase the number of people eligible for Medicaid, (it will).

"The problem for the (Obama) administration is healthcare reform is fiendishly complicated because the healthcare system is fiendishly complicated, and it is not politically feasible to tear up the system and build it again," said Humphrey Taylor, chairman of the Harris Poll, Harris Interactive's long-running public opinion poll. "Instead you have to build on the system that you have. When you try to build on a fiendishly complicated system, you have fiendishly complicated reforms."

Another cause of the confusion is due to the long and heated political debate that surrounded the bill before it was passed, Taylor said.

"The level of ignorance and misinformation is sort of astounding," he said. "It seems people are still reacting to the rhetoric, not the substance of what is in the bill, because they don't actually know what is or is not in the actual legislation."

For more information, click here to read the full report and methodology. HealthDay's news report is available here. Full data on the poll and its methodology are available at Harris Interactive.

TABLE 1
            KNOWLEDGE OF ITEMS THAT ARE INCLUDED IN REFORM BILL (PPACA)
  "Please indicate if you believe each of the following is included (or
  will result from) or is not included (or will not result from) the
  health care reform bill that was signed by President Obama in March
  of this year.  If you don't know, please do not guess but
  check "Not sure."
  Base: All adults

                                                        Is Not
                                        Is Included/   Included/
                                        Will Result    Will Not
                                            From     Result From  Not
                                                                  Sure
  Not allowing insurers to deny
   coverage to people                 %           58            9      34
  because they are sick
  Allowing children to stay on their
   parents' insurance until           %           55            9      35
  they are 26 years old
  Financial penalties for all
   individuals who do not have or     %           52            9      39
  do not buy insurance
  All employers with more than 50
   employees must offer               %           50            9      41
  their employees affordable
   insurance
  Tax credits for small business to
   provide insurance to               %           43           14      43
  their employees
  Increasing the number of people who
   are eligible for                   %           37           13      50
  Medicaid
  Insurance exchanges where people
   can shop for                       %           35           14      52
  insurance
  A new tax on the sale of medical
   devices                            %           27           13      60
  An annual fee to be paid by drug
   companies                          %           21           14      65


  Note: Percentages may not add up exactly to 100% due to rounding.





                                     TABLE 2
            BELIEF THAT ITEMS NOT IN REFORM BILL (PPACA) ARE INCLUDED
  "Please indicate if you believe each of the following is included (or
  will result from) or is not included (or will not result from) the
  health care reform bill that was signed by President Obama in March
  of this year.  If you don't know, please do not guess but
  check "Not sure."
  Base: All adults

                                                       Is Not
                                       Is Included/   Included/
                                       Will Result    Will Not
                                           From     Result From  Not
                                                                 Sure
  An increase in the federal
   government's budget deficit       %           45           13      42
  Higher income taxes for the middle
   class                             %           37           22      41
  All Americans will have health
   insurance                         %           36           29      35
  New ways to ration health care     %           36           18      46
  A new government run health plan
   to compete with                   %           36           22      43
  private insurance plans
  A cut in Medicare benefits         %           33           21      45
  Higher tax deductions from
   workers' pay                      %           33           16      50
  Panels to decide what care very
   sick, older people                %           30           26      44
  should receive
  Illegal aliens will have health
   insurance                         %           28           27      45

Note: Percentages may not add up exactly to 100% due to rounding.


Methodology

This survey was conducted online within the United States July 15 to 19, 2010 among 2,104 adults (aged 18 and over). Figures for age, sex, race/ethnicity, education, region and household income were weighted where necessary to bring them into line with their actual proportions in the population. Propensity score weighting was also used to adjust for respondents' propensity to be online.

All sample surveys and polls, whether or not they use probability sampling, are subject to multiple sources of error which are most often not possible to quantify or estimate, including sampling error, coverage error, error associated with nonresponse, error associated with question wording and response options, and post-survey weighting and adjustments. Therefore, Harris Interactive avoids the words "margin of error" as they are misleading. All that can be calculated are different possible sampling errors with different probabilities for pure, unweighted, random samples with 100% response rates. These are only theoretical because no published polls come close to this ideal.

Respondents for this survey were selected from among those who have agreed to participate in Harris Interactive surveys. The data have been weighted to reflect the composition of the adult population. Because the sample is based on those who agreed to participate in the Harris Interactive panel, no estimates of theoretical sampling error can be calculated.

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