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Hold health insurers accountable for how they spend your money

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DeAnn Friedholm
January 17, 2012

Wisconsinites who buy their own health insurance could be due an estimated $14 million in refunds or lower rates over the next three years, thanks to the Affordable Care Act (ACA), the much-maligned national health reform law. Unfortunately, some Wisconsin officials are trying to deny consumers the money they are owed—and hand most of it right back to the insurance companies.


At issue is a pro-consumer provision in the ACA designed to keep insurance companies from gouging policyholders. This rule—known as the medical loss ratio (MLR)—makes sure insurance companies don’t spend more than 20 percent of customers’ premiums on non-health care items such as marketing, CEO salaries, paperwork and profits. Spend any more, and the company must cut consumers rebate checks.


This rule gives insurers ample room to turn profits while providing an incentive for them to keep unnecessary costs down. But under the state’s proposal to delay the rule, consumers could lose out on more than $13 million in refunds over the next three years.


The Wisconsin Office of the Commissioner of Insurance argued that unless the MLR requirement is weakened, some insurers will withdraw from Wisconsin, leaving residents with fewer choices. Yet the state’s fear is overstated. Wisconsin has the nation’s most competitive health insurance market with 24 insurers offering plans to consumers who buy their own coverage. That contrasts sharply with Maine, for example, which was granted an adjustment because one of just three insurers serving its individual market threatened to pull out if the requirement went into full effect in 2011.


In Wisconsin, more than half of insurers currently meet the new threshold for efficiency, demonstrating that this is a reasonable and attainable goal. Furthermore, a new report shows that the vast majority of insurers around the country can meet these new standards.


Wisconsin residents need strong market competition to keep health insurance costs down and service up. And the new MLR requirement provides a level playing field for that competition. But consumers don’t need an infinite number of health insurance choices if they are of poor value.


Wisconsinites work hard and deserve a fair value for their health insurance dollar. And they deserve state insurance officials who balance their interests along with those of local insurance companies. At a time when families are tightening their belts, insurance companies should be required to do the same. Federal officials are reviewing Wisconsin’s proposal and should reject the state’s attempt to maintain business-as-usual for low-value health insurers.


DeAnn Friedholm is director of Health Reform Consumers Union, the policy and advocacy division of Consumer Reports.
TO COMMENT: Wisconsin residents can comment through January 20th. To submit a comment regarding Wisconsin’s MLR adjustment application, please email MLRAdjustments@hhs.gov. Please include “Wisconsin” in the email subject line.

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