Health Insurance As Public Utility


Super frowny Baucus is super frowny.

Is a provision in the Affordable Care Act that regulates health insurer profit margins a backdoor attempt to turn health insurance into a public utility?

The PPACA's rules governing medical loss ratios—which determine what percentage of an insurance company's operating budget can be devoted to administrative costs and profit—were set at the maximum threshold at which the Congressional Budget Office would decline to include the cost of private insurance premiums in its cost estimates; crossing that threshold would have made the bill far more expensive. Currently, the ratios are set at 80 percent for the small group market and 85 percent for the large group market, meaning that insurers must make certain that either 80 or 85 percent of their budgets are spent on "clinical services." Those ratios are as high as they can be while still leaving insurers some semblance of independence; if nationwide MLRs were set even a single point higher, according to the CBO, health insurance would constitute "an essentially governmental program."

In other words, in the CBO's view, the new health care law walked right up to the government-takeover line, but didn't technically cross it.

Now, however, a handful of Democratic committee chairmen, led by Sen. Max Baucus, are pushing the department of Health and Human Services to interpret the MLR provision in a way that makes it even more onerous than what the bill's language actually calls for.

As the American Action Forum's Douglas Holtz-Eakin and Michael Ramlet explain in a piece for Kaiser Health News, "the new law says unambiguously that the MLR is supposed to be calculated 'excluding Federal and State taxes and licensing or regulatory fees.'"

Talk to the hand.

But just because the law's language is unambiguous doesn't mean that legislators won't try to clarify it. Baucus and the other committee chairmen have written to HHS director Kathleen Sebelius to say that "federal taxes and fees in this context is meant to refer only to federal taxes and fees that relate specifically to revenue derived from the provision of health insurance coverage that were included in the [health reform legislation]." What they don't mention is that including those federal taxes will make it substantially more difficult to satisfy the requirement.

Of course, that seems to be exactly the idea; as a piece in Politico noted this morning, in the ongoing arguments over how regulators should define and enforce the MLR rules, "top House and Senate chairmen want to include as many items as possible on the administrative side of the ledger, which would make the quota harder [for insurance companies] to reach." Not content with having written a law that the CBO views as all but a takeover of the insurance industry, Baucus and his colleagues are now attempting to expand the authority of insurance regulators even further. With the PPACA, Congress walked right up to the government-takeover line; will medical loss ratio regulations let Max Baucus and his fellow Democratic chairmen stick a toe over it?

Read Ronald Bailey's take on health insurance as a public utility here.

NEXT: Chinese Traffic Apocalypse

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  1. Is there a more repulsive human being in the Senate right now than Baucus? That guy really seems to take the cake in being a shitbag. How the hell did he get elected in Montana?

    1. They think he’s Jim Backus.

    2. Baucus looks like David Letterman. That is all.

  2. Caption contest:

    Pic A: Unnnnh. OK, I’m done. Anyone got some TP or should I just use the Constitution again?

    Pic B: Oh, what’s that smell? Smells like Teddy Kennedy after a weekend at South Beach.

  3. Pretty scary stuff when you think about it.


    1. Why would you give a shit about healthcare, bot?

  4. “Is ..the Affordable Care Act..intended to turn health insurance into a public utility?”

  5. Never thought I’d live to see this crap become law. And to think we bothered to fight WWII and lose 400,000 good Americans, just to adopt all of Hitler’s socialism anyway.

  6. This kind of nonsense was the plan all along. Anyone who suggested otherwise was either a fool or a co-conspirator.

  7. Or a useful idiot.

  8. But what’s wrong with mandating that insurance companies’ profit be proportional to their costs? Surely there’s no way that that can horribly, horribly backfire, right?

    1. Won’t happen. They passed a law against unintended consequences.

    2. It usually does. Let’s say the electric utility needs to replace Equipment X. Turns out, that will cost a bundle, so the state mandates that the utility repair Equipment X instead of replacing it. Over the next 10 years, replacing each part that goes bad will cost 5x what a replacement would have cost. Guess who pays for all that? Rate payers.

  9. Did you see how many tractors we produced? And ahead of the 5 year plan! So what if we had to harvest crops by hand.

  10. It will be OK once the health care industry is fully unionized.

  11. Attaboy!

  12. But just because the law’s language is unambiguous doesn’t mean that legislators won’t try to clarify it.

    Oh, they can try. But they need me to do.

  13. Net profit in the Health Insurance industry is already squeezed to 2%. If they manage to get these regulatory issues interpreted in a way that decreases the profit margin by 2%, it won’t matter.

    There won’t be any insurance companies.

  14. Hey look!

    A Volvo sportster at around 1:20!

    1. Hell, wrong thread. See also Chinese Traffic Apocalypse…

  15. Sebelius, like the good little soldier that she is, will of course issue an(other in a long line of) interpretations that is completely at odds with the actual statutory language.

    Because our courts have abdicated their Constitutional responsibilities, that interpretation will be given great deference, and waved into law just as if it had been voted on by Congress and signed by the President.

    God, I hate our government.

  16. Health Insurance As Public Utility[.]

    Since doctors spring up from the Earth . . . right???

  17. We’re all utilities now.

  18. They will not be satisfied until they control every breath you take from birth to death.

  19. Baucus looks like Ted Stevens in that picture, only more decomposed.

  20. Super Frowny Baucus is super serial about how he is going to take the throat of America and cut it ear to ear with the gristly teeth of a band saw blade.

  21. As an expert in utility ratemaking, I encourage this endeavor. My kid’s college ain’t going to pay for itself. And neither is the kid. Or the dates I should be going on to find the mother of that kid. Or even just getting off the goddam couch. Like I said, I’m an expert.

    1. This is nice post for good health

  22. idunno that sounds like a crazy idea man…

  23. I was very pleased to find this site. I wanted to thank you for this great read!! I definitely enjoyed every little bit of it and I have you bookmarked to check out the new stuff you post.

  24. This is nice post for health

  25. What they don’t mention is that including those federal taxes will make it substantially more difficult to satisfy the requirement.

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