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Bill to Bolster Insurance Companies Harms Consumers

The bill erodes tool for reigning in insurance companies and fighting rising costs

Friday, February 03, 2012

Bill to Bolster Insurance Companies Harms Consumers, Protects Profits

WASHINGTON, DC – New legislation introduced today would jeopardize nearly $900 million in estimated health insurance refunds or lower premiums for consumers. The bill (S.2068), authored by Senator Landrieu of Louisiana, guts a key protection for consumers that purchase health insurance on their own or receive coverage from a small employer.

S. 2068 undermines the new Medical Loss Ratio rule that requires insurers spend at least 80% of premiums on medical care, rather than administrative costs including salaries and advertising. But the legislation, which eliminates insurance broker commissions from the calculation of administrative costs, doesn’t ensure that insurance companies direct the savings back to brokers. Instead the bill would permit insurers to simply pad their administrative costs.

“In just a few short months insurers must pay back consumers for wasting their money on inefficient overhead and excessive profit. But this bill would just put that money back into the hands of insurance companies” said Lisa Swirsky, Policy Analyst with Consumers Union. “This is a giveaway to big insurance and a significant loss for consumers struggling to afford health insurance.”

The new rule, included as part of the Affordable Care Act (ACA), is a key component of the law’s aim to slow rising premiums. The National Association of Insurance (NAIC) found that altering the rule to remove broker compensation will result in a loss of more than 60% of forthcoming rebates for consumers.

“The single biggest complaint we hear about health insurance is ever-increasing premiums,” said Swirsky. “This bill erodes the biggest tool we have for reigning in insurance companies and fighting rising insurance costs.”

Contact: David Butler or Kara Kelber, 202-462-6262