Seattle Showdown: How Much Say Will Health Insurance Industry Have Over New Health Reform Law?

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Insurance Commissioners and Obama Administration Must Resist More Weakening of Curbs on Industry Overhead and Profit, Says Consumer Watchdog

Seattle, WA –The nation’s state insurance commissioners are making far-reaching decisions in Seattle this week on whether health insurance companies will spend more on health care, less on their own overhead and investor profit. The decisions will affect whether insurance companies continue with double-digit premium increases and declines in the amount of actual health care they provide, or seek a more efficient business model that is as fair to consumers as it is to Wall Street, said Consumer Watchdog.
"The health insurance industry wants freedom to continue unlimited premium increases, along with steady reductions in its percentage of spending on health care," said Judy Dugan, research director of Consumer Watchdog. "Health insurance will be mandatory starting in 2014, and the industry will gain millions of new customers—yet its lobbyists and lawyers refuse to accept curbs on overhead, profit and administrative waste."
The federal health reform law, the Affordable Care Act, seeks to restrict the amount insurers can spend on overhead, including bloated executive salaries, and administration. That is a first step toward holding down insurance rates and boosting the amount spent on health care.
When Americans are required to buy from for-profit insurance companies that dominate the market, the insurance companies cannot answer only to Wall Street, said Consumer Watchdog. Currently, investors reward insurers with a boost in stock price for cutting the percentage of revenue they spend on health care.
See joint letter to HHS by Consumer Watchdog and the Center for Media and Democracy at:
The health law requires insurers to spend 80% to 85% of customer premiums on health care, with the intent of forcing the companies to be more efficient and work harder to hold down the  cost of care (for instance, federal employee health benefit plan operate with single-digit overhead costs, noted Consumer Watchdog.) The NAIC is recommending regulations to the Department of Health and Human Services, which can accept, reject or modify them.
The NAIC has already made significant concessions that undermine the intent of the law. Formerly administrative jobs and costs, such as claim reviews, all professional accreditation fees (which are mainly about financial stability), undefined public health campaigns and vague “health quality improvements” would be counted as direct health care. And, despite objections from major Congressional leaders who wrote the law, the NAIC’s latest proposal would allow the companies’ federal income taxes to be deducted from administrative expenses.
See public health advocates’ analysis of concessions at:  
“Every change that the insurance industry is fighting for weakens the intent of the law, which was to make insurers operate more efficiently and slow the unaffordable premium increases that face consumers who are watching their own income erode,” said Dugan.
The NAIC will make key decisions Tuesday and begin sending its recommendations to HHS. Consumer Watchdog and the NAIC’s own consumer representatives have urged commissioners to hold the line on further weakening of the regulations–despite legal threats by insurers that they will sue if they don’t get their way, particularly on tax deductions.
“This meeting is a showdown, the first in a long process to decide whether the Affordable Care Act will live up to its name by cutting health insurance costs and improving care,” said Dugan. “The regulations proposed at this meeting are not enough to accomplish that, and it will be up to HHS to strengthen them.”
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Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at:

Consumer Watchdog
Consumer Watchdog
Providing an effective voice for American consumers in an era when special interests dominate public discourse, government and politics. Non-partisan.

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