GOP lawmaker: ObamaCare rule helps insurers, not consumers

An ObamaCare rule change is drawing fire from a Republican lawmaker who says it will raise profits for insurance companies and hike executive pay.

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In a letter to Health and Human Services Secretary Kathleen Sebelius on Tuesday, Rep. Diane Black (R-Tenn.) said changing the ObamaCare spending formula to allow insurers to use more premium dollars on administrative costs will take a bite out of consumers.

“This is deeply concerning, as it could result in higher out of pocket costs for consumers solely for the benefit of the insurance industry,” Black wrote in the letter.

The administration announced the change on Friday. It would allow insurers to use more of the premiums they collect on administrative costs and CEO bonuses.

The proposal would help insurers, who have faced higher-than-expected costs related to ObamaCare because of the problem-plagued rollout.

But Black said the change was deeply concerning.

“Adjusting the percentage that insurance providers are required to spend on medical care by two percent would have the combined impact of reducing the amount that insurance providers will be required to pay for people's medical care while increasing the amount that insurance companies are allowed to retain for profit and for executive pay,” Black said.

“This is deeply concerning, as it could result in higher out of pocket costs for consumers solely for the benefit of the insurance industry,” she continued.

Under the Affordable Care Act’s medical loss ration, insurers now are required to spend 80 percent of premiums they collect on patient care. The other 20 percent is free to be spent on administrative costs and CEO bonuses, or reinvested as profit.

A spokesman for America’s Health Insurance Plans defended the rule change, saying insurers have already made considerable sacrifices in helping the administration recover from the troubled ObamaCare rollout.



"Health plans made considerable investments in time, resources and manpower to minimize disruption to consumers caused by all the technical problems of HealthCare.gov," Robert Zirkelbach told Kaiser Health News last week.


“Health plans should not be penalized for all the extra work they have done to help consumers through this process," he said.



HHS spokeswoman Joanne Peters said insurers that don’t spend 20 percent of premiums on patient care will still be required under the law to spend some of the additional profits on consumer rebates. The rule has so far yielded billions of dollars in rebates to consumers every year, which has become a major talking point for the administration.

“This proposal clarifies what are allowable administrative costs for 2014 – it does not change the fact that insurers that spend more than 20 percent of premiums on profit or excessive administrative costs have to provide a rebate to their consumers,” she said. “Consumers received $500 million in rebates in 2012, averaging approximately $100 per family. Since the law’s inception, the 80/20 rule has contributed to an estimated savings of nearly $5 billion.”

Black asked Sebelius whether the proposed rule change puts consumers “at greater risk of being taken advantage of by insurers,” if the rule will be reversed in future years, and if it’s “fair to force Americans through tax penalties to give insurance companies an even greater percentage of their premiums for costs not related to medical care.”