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AARP backs bill to extend new rules on insurers' spending
AARP endorsed a bill Tuesday that would impose tighter limits on supplemental health plans that are often sold under the AARP brand.
The seniors' lobby backed a bill that would extend the healthcare law's medical loss ratio (MLR) provisions to Medigap plans. The new law requires traditional plans to spend 80 to 85 percent of their premiums on medical care. Medigap policies are subject to a lower limit.
"By raising the MLR for Medigap policies, Congress would create a balance between maximizing the value of health insurance for consumers and providing issuers with fair compensation for legitimate administrative costs," AARP said in a letter endorsing the bill, introduced by Sen. John Kerry (D-Mass.) and Rep. Pete Stark (D-Calif.).
A healthy piece of AARP's revenue comes from Medigap plans. The organization doesn't sell the plans directly, but lends its brand name to certain policies and collects royalties in return. Republicans have attacked AARP for supporting healthcare reform, arguing that the group stands to benefit if cuts to Medicare Advantage drive up business for Medigap plans.
The healthcare law's MLR requirements didn't extend to Medigap because it's a form of supplemental coverage, said Robert Zirkelbach, a spokesman for America's Health Insurance Plans. He said Congress has traditionally recognized that supplemental coverage is different from comprehensive policies and therefore excluded almost all supplements from healthcare reform's new regulations.
As supplements, Medigap plans collect lower premiums than comprehensive policies, but the administrative costs aren't necessarily lower. Extending the 80 to 85 percent MLR standards to Medigap would disrupt coverage with which seniors are satisfied, Zirkelbach said.
