US Health Secretary seeks consumer, insurer balance

by reuters | Thomson Reuters Foundation
Friday, 17 September 2010 22:28 GMT

* Medical-loss-ratio due soon, seeks balance - Sebelius

* Consumer protections start Thursday, insurers ready

* Rate increases not caused by reforms - Health Secretary

* Sebelius sees "serious harm" from GOP funding threats

By Susan Heavey

WASHINGTON, Sept 17 (Reuters) - The Obama administration is seeking to balance consumer and health insurance industry interests as it finalizes a rule on how much insurers must spend on patient care versus administrative costs and profits.

Such spending, known as the medical loss ratio (MLR), is closely watched by Wall Street, and its new regulation is part of a host of changes called for under the sweeping healthcare reform law passed in March.

Health insurers are seeking broad definitions they say will give them flexibility to provide better care, noting that too-strict rules could force some to flee the market. Consumer advocacy groups and Democratic lawmakers want tighter limits to ensure that the companies spend enough on patient claims.

"It will be a balance," U.S. Health Secretary Kathleen Sebelius told Reuters in an interview recorded for C-SPAN's Newsmakers. "We definitely want consumers to get the bang for their buck .... On the other hand, we want to make sure that people don't see their companies exit the market, that we don't have a disruption."

Investors are eagerly anticipating the recommendations on the MLR rules from a state insurance commissioner organization that is advising government, which will ultimately decide on the final regulations.

Sebelius said the government will issue the final rules for MLR "in the near future."

Starting next week, other new reforms will disallow caps on lifetime coverage, and prevent discrimination against children with preexisting ailments, among other changes.

Health officials have "been working very, very closely with major insurers," Sebelius said Friday in the interview which was conducted together with the Wall Street Journal. "I think companies have known what's coming (and) are prepared for it."

CHANGING THE MARKET

Despite next week's changes, millions of Americans are expected to remain without coverage.

Most working-age adults get coverage through an employer, while federal and state programs provide care for the elderly, disabled, poor and some children.

Nearly 51 million people in the United States had no coverage last year, up from about 46 million in 2008, the U.S. Census Bureau announced earlier this week. [ID:N16177029]

"I don't think there's any question the economy has taken a huge toll on the numbers of insured Americans," Sebelius said. "It makes it more important than ever that we rebuild this market," she said.

But some industry experts say the new reforms could cause insurance companies to merge as a way to protect themselves against expensive changes. That, in turn, could affect the number and type of health plans available.

Sebelius said, "There may be companies or books of business that are going to have to shift as we move toward the state-based exchanges." Such exchanges will not start until 2014, and aim to help people who have to buy their own insurance shop for and compare plans.

SERIOUS HARM FROM GOP

Some Republicans have vowed to fight to repeal the health law or strip it of critical funding if they win control of Congress in November.

"They could do some serious harm," said Sebelius, noting that consumers would have to give up some benefits.

Sebelius, who said she has traveled to 30 states to promote the reforms, said the law is just a platform to build on.

Still, recent polls have shown some consumers are confused about various aspects of the health law. [ID:nN08135531]

Consumers are already nervous about potential rate increases as some insurers send notices with estimates of double-digit hikes.

But Sebelius said those increases cannot be blamed on the new reforms, most of which have not yet taken effect.

Asked if Democrats could do more to promote the reforms, she said: "While I think there are snapshots of people clearly running away from the bill ... what I find is people really championing" the changes.

The C-SPAN interview will air Sunday and is also online at: http://link.reuters.com/kyh44p. (Reporting by Susan Heavey; Additional reporting by Lewis Krauskopf in New York; Editing by Richard Chang)

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