Medigap Medical Loss Ratio Improvement Act of 2011

Mr. President, the Affordable Care Act helped to ensure that insurance companies spend a substantial portion of premium dollars on medical care and health care quality improvement, rather than on administrative costs and profits. However, due to remaining discrepancies not all Medicare beneficiaries are afforded the same protection under the law.

Medical loss ratios make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money. Beginning this year, the medical loss ratio provision in the Affordable Care Act requires insurance policies sold in the individual and small group markets to spend 80 percent of premium dollars on medical care. Policies sold in the large group market are required to spend 85 percent of premium dollars on medical care. Insurance companies that fail to meet this standard are required to provide a rebate to their customers beginning in 2012.

The Affordable Care Act also required Medicare Advantage plans to spend 85 percent of premium dollars on medical care starting in 2014 or they would be required to refund the difference to the Federal Government.

Compared to most other insurance products, Medigap policies now have lower statutory minimums for the percentage of premium dollars that must be spent on medical care. Under current law, Medigap policies must meet a minimum medical loss ratio of 65 percent in the individual market and 75 percent in the group market.

In 1990, Congress first passed legislation standardizing Medigap policies and instituting minimum MLR standards in reaction to evidence of widespread sale of duplicative policies with high overhead. Today, more than 9 million Medicare beneficiaries purchase private supplemental Medigap policies to help cover cost sharing and deductibles in traditional Medicare.

The Medigap Medical Loss Ratio Improvement Act updates the MLR standards for Medigap insurers, increasing the percentages to levels put forth in health reform for other products. Specifically, it will raise the MLR from 65 percent to 80 percent in the individual market and from 75 percent to 85 percent in the group marketplace. To give insurers time to prepare for this change, it would not become effective until 2014.

This legislation is endorsed by organizations representing millions of senior citizens and consumers of all ages, including: AARP, AFSCME, Alliance of Retired Americans, Center for Medicare Advocacy, Community Catalyst, Families USA, Health Care for America Now, Medicare Rights Center, National Council on Aging, and the National Senior Citizens Law Center.

In endorsing the bill, AARP highlights that, ``AARP supports this change because it will provide greater transparency and accountability for expenditures made by health insurance issuers, and encourage them to become more efficient in their operations to help ensure that consumers receive fair value for their premium dollars.''

The reforms in this bill would ensure that Medigap enrollees receive the same value for their premium dollars that is afforded to every other American family. I look forward to working with my colleagues in the Senate to pass this legislation.

Mr. President, the Affordable Care Act helped to ensure that insurance companies spend a substantial portion of premium dollars on medical care and health care quality improvement, rather than on administrative costs and profits. However, due to remaining discrepancies not all Medicare beneficiaries are afforded the same protection under the law.

Medical loss ratios make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money. Beginning this year, the medical loss ratio provision in the Affordable Care Act requires insurance policies sold in the individual and small group markets to spend 80 percent of premium dollars on medical care. Policies sold in the large group market are required to spend 85 percent of premium dollars on medical care. Insurance companies that fail to meet this standard are required to provide a rebate to their customers beginning in 2012.

The Affordable Care Act also required Medicare Advantage plans to spend 85 percent of premium dollars on medical care starting in 2014 or they would be required to refund the difference to the Federal Government.

Compared to most other insurance products, Medigap policies now have lower statutory minimums for the percentage of premium dollars that must be spent on medical care. Under current law, Medigap policies must meet a minimum medical loss ratio of 65 percent in the individual market and 75 percent in the group market.

In 1990, Congress first passed legislation standardizing Medigap policies and instituting minimum MLR standards in reaction to evidence of widespread sale of duplicative policies with high overhead. Today, more than 9 million Medicare beneficiaries purchase private supplemental Medigap policies to help cover cost sharing and deductibles in traditional Medicare.

The Medigap Medical Loss Ratio Improvement Act updates the MLR standards for Medigap insurers, increasing the percentages to levels put forth in health reform for other products. Specifically, it will raise the MLR from 65 percent to 80 percent in the individual market and from 75 percent to 85 percent in the group marketplace. To give insurers time to prepare for this change, it would not become effective until 2014.

This legislation is endorsed by organizations representing millions of senior citizens and consumers of all ages, including: AARP, AFSCME, Alliance of Retired Americans, Center for Medicare Advocacy, Community Catalyst, Families USA, Health Care for America Now, Medicare Rights Center, National Council on Aging, and the National Senior Citizens Law Center.

In endorsing the bill, AARP highlights that, ``AARP supports this change because it will provide greater transparency and accountability for expenditures made by health insurance issuers, and encourage them to become more efficient in their operations to help ensure that consumers receive fair value for their premium dollars.''

The reforms in this bill would ensure that Medigap enrollees receive the same value for their premium dollars that is afforded to every other American family. I look forward to working with my colleagues in the Senate to pass this legislation.