All Hail The Almighty CBO And Its Crippling Of Medical Loss Ratio

Harry Reid's manager's amendment is out, and once again the legislation was written to get the best looking CBO score and not the best possible policy for the American people.

Jay Rockefeller wanted a minimum medical loss ratio (MLR) of 90% for all health insurance. His crazy idea was that if we are giving hundreds of billions to private insurance companies we should demand that they spend at least 90% of that money on medical care.

The CBO rejected this by saying if they set such a high MLR they would would declare all private insurance effectively part of the federal budget. The CBO somehow concluded that if the MLR was only 85% for the small group market and 80% for the individual market that would be just low enough to make private insurance magically not part of the government:

Taking those differences into account, CBO has determined that setting minimum MLRs [medical loss ratios] under the PPACA at 80 percent or lower for the individual and small-group markets or at 85 percent or lower for the large-group market would not cause CBO to consider transactions in those markets as part of the federal budget.

A proposal to require health insurers to provide rebates to their enrollees to the extent that their medical loss ratios are less than 90 percent would effectively force insurers to achieve a high medical loss ratio. Combining this requirement with the other provisions of the PPACA would greatly restrict flexibility related to the sale and purchase of health insurance. 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 CBO said “jump,” and Harry Reid said “how high.” The new MLR set by the manager's amendment are exactly the limits the CBO said they should be: 85% for the small group market and 80% for the individual market. This change was not made for policy reasons. This change was not made because it was best for the American people. This change was made purely for PR reasons, so the CBO would not make some absurd claim that all private insurance was part of the federal budget and make the CBO score look bigger.

Unfortunately, the new MLR regulations have a potentially serious loophole.

‘‘(d) ADJUSTMENTS.—The Secretary may adjust the rates described in subsection (b) if the Secretary determines appropriate on account of the volatility of the individual market due to the establishment of State Exchanges.”

This subsection appears to give the Secretary of HHS the power to unilaterally eliminate or gut even this very low 80% MLR requirement.

I wish for the day when legislation is written by our legislators and not by some unelected accountant. Because Reid wanted to make the CBO score look prettier, he will allow insurance companies to waste an extra 10% of your premiums on not providing health care. All hail the almighty CBO.