Budget Office report likely kills spending provision of Franken health-care amendment

WASHINGTON, D.C. — A provision of a key amendment offered to the health care bill by Sen. Al Franken is likely dead after a Congressional Budget Office report (PDF) released today said it would come close to federalizing the entire insurance industry.

However, the CBO analysis doesn’t eliminate medical loss ratio regulation entirely — in fact, it may have boosted the likelihood some form of regulation will advance by noting that medical loss ratio requirements “ can be a powerful regulatory tool.”

Franken’s amendment would require group insurers to spend 90 percent of health premiums on actual health care costs, rather than administration, advertising or profits. The requirement for individual plans would be 85 percent. The current Senate health care bill sets those amounts at 80 and 75 percent, respectively.

“In CBO’s view, this further expansion of the federal government’s role in the health insurance market would make such insurance an essentially governmental program, so that all payments related to health insurance policies should be recorded as cash flows in the federal budget,” the agency wrote in a memo dated Monday.

Franken said he was “pleased” with the CBO’s report, saying it would advance a medical loss ratio requirement in some form.

“I’m thrilled to see the CBO determine that a high, standard medical loss ratio could be made permanent. There are currently no such federal requirements and implementing a minimum medical loss ratio help us make sure that insurance companies are focused on patients, not profits,” Franken said today.

“While requiring 90 percent of premium dollars to go toward direct services would go a long way towards moving the rest of the country up to where we are in Minnesota, even a slightly lower percent would be a big win for those of us who want to hold insurance companies accountable and ensure value for our premium dollars. And having that standard set permanently would be a major victory.”

I asked Franken’s spokesperson, Jess McIntosh, whether or not the senator was upset that his 90 percent amendment just got ruled out.

“No — it’s about getting it set permanently. That’s the huge win,” McIntosh replied.

You can also learn about all our free newsletter options.

Comments (3)

  1. Submitted by T J Simplot on 12/15/2009 - 01:50 pm.

    Low admin costs are not necessarily a good thing. Effecient admin costs are a good thing. If you want lower admin costs you end up having to cut things like fraud investigation, nurse phone lines, and chronic disease management. These do add to the admin costs but they save more money than they cost.

  2. Submitted by Tom Anderson on 12/15/2009 - 06:20 pm.

    But I think that the point of the amendment was to federalize the insurance agency. The more that the government runs, the more it controls and can shape results. Imagine trying to run a company with the government telling you how you have to spend your money.

  3. Submitted by Peter Soulen on 12/16/2009 - 06:57 am.

    The best part about bringing MLRs into the spotlight is that it forces once again, those that defend insurance company profiteering to defend insurance company profits. Health care is not a “get to have” it’s a “got to have”…

    Let the companies selling The Clapper, “Head On Apply Directly to the Forehead” and the installation of 41,300 holiday lights on a single tree do the profiteering un-regulated.

    Essential services like health care need a level playing field. Of course it’s about Federalizing insurance. We’ve seen what un-regulated, private, for profit insurance has to offer… Alabama.

Leave a Reply