So how much of your health insurance premium goes toward medical expenses?
It might seem like that should be an easy computation, and the new health law sets targets for insurers to meet. But determining exactly what sorts of spending qualify as medical expenses has proven to be a major point of contention among insurers, regulators and Capitol Hill.
Tomorrow, members of the National Association of Insurance Commissioners, which has been advising federal officials on interpreting the ambiguities of the health law, will take up the issue at a meeting in Seattle.
Under the law, insurers are required to spend 80 percent of the money they collect in premiums from individuals and small businesses. For large employers, 85 percent of premiums are supposed to go to medical care. The magic number is known in the business as the medical loss ratio.
If insurers fall short of the target, they have to pay rebates to consumers beginning next year.
Health insurers would like to have a wide array of their expenses count toward that goal. For example, one executive, Cigna’s chief lobbyist William Hoagland, "believes insurance companies should be able to count smoking-cessation programs and health coaching as medical care. He’s also in favor of including 'utilization review,' the controversial process in which nurses and administrators employed by the insurer review treatment plans and then approve or deny them," Kaiser Health News reports.
But some consumer groups are pushing for a narrower definition. Health Care for American Now says insurers' expenses such as lobbying, executive pay and administrative costs should not be considered medical care. The group tells members:
The battle over the medical-loss ratio is the new health care reform fight, and if the health insurance companies win, we lose. If they win, they'll be able to deny people needed care and call the administrative costs of that denial 'medical care' under the new law.
Most recently, the arguments have centered on the question of whether taxes paid by insurers could be considered medical expenses. Key Democratic lawmakers sent a letter to Health and Human Services Secretary Kathleen Sebelius last week arguing that their intent in preparing the legislation was for a small segment of federal taxes to be counted.
But the health insurance industry group, America's Health Insurance Plans, says the law is clear and it includes all federal and state taxes. It points to a legal analysis performed for the group as confirming that view.
The Hill reports the state commissioners are "leaning towards allowing insurers to exclude all federal taxes except those on investment income."
Whatever decision the state regulators reach, the ultimate decision will come back to HHS and Sebelius, who has the authority to implement many of the bill’s provisions.