Chairmen of the Senate and House committees with jurisdiction over health care reform sent a letter
to Secretary Sebelius on Tuesday clarifying their intent on a
particularly controversial provision in the health care law, resolving
a long dispute and throwing a wrench into the insurance industry’s
As the NAIC works on crafting detailed regulations for HHS to certify,
health insurers are lobbying to make sure that provisions like the one
in question, on the medical loss ratio, are interpreted in their favor.
The medical loss ratio, the percentage of premium dollars insurers must
spend on health care, is written in the bill to exclude from the
denominator, where premium revenue is tallied, "federal and state taxes
and licensing or regulatory fees." Insurers argue that Congress meant
for this to be all-inclusive of taxes such as income tax and investment
tax, an argument that would mean insurers would have to pay less toward
health care for their consumers.
Because one of NAIC’s working subgroups reached the same conclusion,
Senators Baucus, Dodd and Harkin and Representatives Levin, Waxman and
Miller wrote a letter expressing their disagreement and clarifying
their intent. The exclusion of taxes and fees was only meant to include
those “that relate specifically to revenue derived from the provision
of health insurance coverage that were included in the PPACA." This
would narrow the exclusion to taxes on insurers like the excise tax and
those on "Cadillac" plans, leaving out income and investment taxes.
So what does this mean? AHIP has called it a "last-minute rewrite" of
the law and continues to stand by its original position. Indeed, their
argument is that congressional intent is not in this case a valid way
of interpreting the law. This alludes to a famous Supreme Court
doctrine of cautioning against using legislative intent to interpret a
law because the statements of one or two Congressmen cannot be said to
speak for the whole body.
AHIP seems to forget that the HHS is not a judicial body but a
political one, and that rulemaking agencies play an inherently
different role than courts do. Rulemaking agencies are seeking to write
detailed regulations derived from broad legislative language. In
writing these rules, they are supposed to extrapolate legislative
meaning and apply it to practical matters in a way that preserves the
spirit of the legislation. Indeed, not only is this type of rulewriting
interpretation fundamentally different from judicial interpretation,
but it can be said that HHS’ actions in this case are also part of the legislative process–meaning HHS & NAIC can and should take all the guidance from members of Congress they can get.
Whether the NAIC will reverse its subgroup’s determination is yet to be
seen, but both the NAIC and HHS would be wise not to listen to health
insurers’ arguments when they have such a clear explanation of the law
from Congress that points them in the opposite–and correct–direction.