Improving Consumer Protections For Medigap Insurance
Mr. Speaker, I rise to introduce the Medigap Medical Loss Ratio Improvement Act. The legislation improves consumer protections in the Medigap marketplace by raising the minimum percentage of premium dollars that must go toward medical…
Mr. Speaker, I rise to introduce the Medigap Medical Loss Ratio Improvement Act. The legislation improves consumer protections in the Medigap marketplace by raising the minimum percentage of premium dollars that must go toward medical care. I'm joined by my colleagues Henry Waxman, Ranking Democrat on the Energy and Commerce Committee, and Frank Pallone, Ranking Democrat on the Energy and Commerce Health Subcommittee as original cosponsors of the legislation. Senator Kerry (D-MA) is introducing the companion bill in the Senate.
The medical loss ratio, MLR, is the percentage of premium dollars an insurance plan spends on the provision of medical care, rather than administrative costs, profits, executive compensation, or other expenses. It is an important point of information for consumers because it is a concrete way for people to measure the value of a health insurance product and to compare among other plans in the marketplace.
As part of the new health reform law, insurers in the private health insurance marketplace must now meet a minimum medical loss
ratio percentage of 80 percent in the individual market and 85 percent in the group marketplace. The law also requires all Medicare Advantage plans, private plans offered through Medicare, to meet an 85 percent MLR standard by 2014.
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 nine 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.
It 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.''
This bill should garner bipartisan support. At a February 10, 2011 hearing in the Ways and Means Committee, a Republican Member questioned CMS Actuary Rick Foster about this issue: ``. . . Medigap policies that seniors purchase to supplement traditional Medicare are only required to meet a medical loss ratio of 65 percent . . . do you think that the MLR policy should be applied equitably across the line?'' He answered that ``. . . you could probably make a good case that if it makes sense in general then it would make sense for the broader spectrum, including Medigap policies.'' The Member responded, ``Well, I would think that most people would agree that if we are going to do something we should do it equally.''
I agree. That's exactly what we're doing with the Medigap Medical Loss Ratio Improvement Act today--we are extending a commonsense consumer protection to private Medigap plans. I encourage our colleagues on both sides of the aisle to join us to enact this sensible improvement to existing law for those who purchase private Medigap insurance.