Health Care Reform Bills - Does Actuarial Value Trump Medical Loss Ratio?

[slipslidingaway]

http://healthcare-legislation.blogspot.com/2009/11/does-actuarial-value-trump-medical-loss.html

"The Affordable Health Care for America Act introduced in the House on October 29 would require any health insurer in the small or large group market to issue rebates to enrollees if its medical loss ratio (the proportion of the insurer’s income from premiums that it uses to pay medical claims) fell below 85%. A quick review of major health insurers’ current medical loss ratios, as reported by the insurers themselves, indicates that most would have to beef up benefits paid, reduce their administrative costs, or provide rebates to their members...


The American Medical News on August 24 reported that, for the second quarter of this year, the average medical loss ratio of the largest publicly traded health plans was 85.2%, but ranged from 82.9% to 86.8%.

But limiting insurers’ administrative expenses is not necessarily the most beneficial strategy for insureds. Ensuring a high actuarial value of benefits provided would be best. The Congressional Research Service earlier this year reviewed “actuarial value” issues. The actuarial value provides an estimate of the proportion of health care expenses a plan likely will pay. As the economy has deteriorated, so has the actuarial value of employer-sponsored health insurance. Individuals covered by employer-sponsored health insurance these days get lower actuarial values and less protection..."


The actuarial squeeze on low and middle income families

http://pnhp.org/blog/2009/10/27/the-actuarial-squeeze-on-low-and-middle-income-families/

"...The best private insurance available today – employer-sponsored health plans – have an actuarial value of 80%. That means that the insurance pays 80% of the covered costs of health care and patients are responsible for the other 20%. Patients also are usually responsible for out-of-network services and for services and products that are not benefits of the plans.

The Health Affairs article by Jon Gabel and his colleagues shows that plans with an 80% actuarial value are not providing adequate financial protection to individuals with modest incomes who need health care. Having a plan with an 80% actuarial value can place you in the ranks of the underinsured.

Basic coverage under the proposals before Congress would provide an actuarial value of 65% or 70%. That means that the patients would be responsible for the remaining 30% or 35% of health care costs, although the proposals would limit the total amount for which the patients are responsible under the plans. Patients also would be responsible for out-of-network services and for services and products not covered by their plans.

If there is a cap on out-of-pocket spending, then why should the precise actuarial value make difference? Simply, the lower the actuarial value, the greater the likelihood that the patient will have to spend the full amount up to the cap. Thus more individuals will be negatively impacted. Also, the amount of the cap makes a very big difference. The proposed caps on out-of-pocket spending, when added to the patient’s share of the premium, create a financial hardship for most low and middle income individuals and families..."


Links from the above article

Provision Under Consideration for Merged Senate Health Bill Would Harm Needy Families

http://www.cbpp.org/cms/index.cfm?fa=view&id=2962


Trends In Underinsurance And The Affordability Of Employer Coverage, 2004-2007

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http://content.healthaffairs.org/cgi/content/full/28/4/w595