Feds gathering input on medical loss ratios and reviewing health insurer rate hikes

The federal health-care reform law includes a number of insurance market reforms intended to protect consumers. Among them, it requires health insurers to submit data on how much money they spend on care versus profits, advertising, etc. (In case you're taking notes, the term for this is the "medical loss ratio.")

The new law says that if the medical loss ratio is below a certain level, people enrolled in that particular health plan will get rebates.

The U.S. Department of Health and Human Services is gathering public input on how to put in place policies to define and calculate this percentage. Here's a letter that HHS Secretary Kathleen Sebelius sent to the National Association of Insurance Commissioners about the matter. (And here's the Federal Register notice.)

A similar process is underway for elements of the law involving health insurer rate hikes. The law requires HHS to work with the states "to establish an annual review of unreasonable rate increases, to monitor premium increases and to award grants to states to carry out their rate review process." The law also requires insurers, starting this year, to post on their websites any justification for such a rate increase. (For a lot more detail on this aspect of the law, see this request for comments, also published in the Federal Register.)

Feds warn against scam artists pretending to offer coverage under health-reform bill

U.S. Department of Health and Human Services Secretary Kathleen Sebelius is warning of scammers attempting to capitalize on the new health-reform law "by setting up 1-800 numbers and going door to door trying to sell fraudulent insurance policies." She's asking state insurance commissioners and attorneys general to investigate and prosecute.

From Sebelius' letter to state insurance commissioners:

Unfortunately, scam artists and criminals may be using the passage of these historic reforms as an opportunity to confuse and defraud the public...Some have attempted to make dishonest profits by urging consumers to obtain coverage in a non-existent “limited enrollment” period that they falsely claim was made possible by the new legislation.

She also noted that:

...There are new insurance options in the near future – a new high-risk pool program for those blocked out of insurance due to a pre-existing condition, for example, and new insurance protections that begin in September. But, in the meantime, consumers should beware policies that are time limited, offer limited benefits, or advertise themselves as necessitated by health insurance reform.

The Washington flood Market Assistance Plan: Will companies step forward?

Washington state Insurance Commissioner Mike Kreidler has asked about 200 insurers to take part in a voluntary "market assistance plan" (MAP) to help businesses in the Green River Valley find adequate flood coverage. These plans work like a matchmaker, pairing companies needing flood coverage with insurers willing to sell it.

State lawmakers and Gov. Chris Gregoire recently approved legislation granting Kreidler authority to order insurers to form a "Joint Underwriting Association" and sell flood coverage in the heavily industrialized area, which is downstream from the Howard Hanson Dam, if insurance is unavailable.

At legislative hearings in Olympia in January, insurance industry lobbyists told lawmakers they much preferred the voluntary matchmaker approach:

Lewis County couple charged in $17,000 insurance fraud case

A Lewis County, Wash. couple has been charged with filing a false insurance claim for nearly $17,000 in property allegedly destroyed by rainwater leaking into a truck.

Jennifer Mau, 30, and David Eden, 47, have been charged in Lewis County Superior Court with filing a false insurance claim or proof of loss. The case was submitted to the county prosecutor by the state insurance commissioner’s office.

On Jan. 5, 2007, the couple’s home in Morton burned. The two said they stored new furniture and belongings at a storage rental facility in Centralia while the home was being rebuilt.

On March 30, 2007, Mau rented a U-Haul truck to move the items to the couple’s new home. Afterward, Mau and Eden claimed that rainwater leaked into the truck, damaging their belongings. They filed a $16,789 claim with Republic Western Insurance. They submitted store receipts for the items, which they said they discarded at a landfill.

But there were several problems with the claim:

• U-haul subsequently conducted water tests on the truck and determined that it did not leak.

• Weather reports for that date indicate little or no precipitation.

• And the weight of the items Mau claimed to have taken to the landfill would have significantly exceeded the weight dumped at the landfill, according to the landfill receipts they submitted.

After investigating the claim, Republic Western denied it. Insurance Commissioner Mike Kreidler’s Special Investigations Unit also investigated and took the case to the Lewis County prosecutor.

What people are calling us about...

Our consumer hotline (1-800-562-6900) continues to get a lot of calls from folks with questions about federal health reform, what it means, and when different provisions of the law will take effect.

Among the calls so far this week:

• When it will start?

• What are the benefits?

• How much will it cost?

• When can I enroll my dependent child who is under the age of 26? Does this apply to non-students?

• When will the pre-existing wait period be waived?

• How much is the small employer tax credits?

• How do I apply for the exchange?

• Will this open up Basic Health to enrollment this year?


We're trying to answer as best we can, although many of the details are still being worked out (and the exchanges don't take effect until 2014, sorry). We've also set up this detailed web page about the law and how it works, with special sections for its effects on different categories of people (seniors, young adults, small business owners, etc.) Take a look...

Tennessee whistleblower in illegal health insurance scam: "People would call in crying, but we were instructed to tell them that their claims were `in process' and to call back in 30 days"

The Nashville Tennesseean has an extraordinary story today about a company and a number of individuals that our office issued a cease and desist order against back in January.

From the story, by G. Chambers Williams III:

When Lisa Hernandez went to work for health-insurance administrator Smart Data Solutions as a customer-service representative, she thought her job would be to help sick people get their medical bills paid.


But on just her second day, she knew something was horribly amiss.

Hernandez said she had to answer an unending barrage of phone calls from anguished policyholders questioning why no payments had been made on their health claims — some of which had been pending for as long as "four or five years."

"People would call in crying, but we were instructed to tell them that their claims were 'in process' and to call back in 30 days," Hernandez said. "We were told to flat-out lie to people just to get them off the phone."

For most, the medical bills were never paid, she said, adding that "there were boxes of unpaid claims sitting on the floor everywhere — they didn't even have any file cabinets."

The company and its affiliates are under investigation in a number of states, including Washington. Our office believes that dozens of state residents unwittingly bought illegal health insurance products from this network.
More from the Tennessean story:

A companion company, the American Trade Association, marketed the policies, and SDS was the purported benefits administrator; together, the two firms — controlled by Springfield businessman Bart S. Posey — collected as much as $14 million over the past year and a half alone from customers in all 50 states and the District of Columbia, according to the Tennessee Department of Commerce and Insurance.

Stay tuned.

Health insurance reform in Washington state: New data from HHS

The U.S. Department of Health and Human Services this morning posted this detailed summary of some of the effects of the new federal health care law, from effects on senior citizens to small business to doctors.

From the agency:

• 811,000 residents who do not currently have insurance and 359,000 residents who have nongroup insurance could get affordable coverage through the health insurance exchange.
• 457,000 residents could qualify for premium tax credits to help them purchase health coverage.
• 897,000 seniors would receive free preventive services.
• 159,000 seniors would have their brand-name drug costs in the Medicare Part D “doughnut hole” halved.
• and 92,500 small businesses could be helped by a small business tax credit to make premiums more affordable.

The page has a lot more specifics...