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The federal Department of Health and Human Services (HHS) announced on Friday that it will waive the Patient Protection and Affordable Care Act’s (PPACA) medical loss ratio (MLR) provisions for the individual health insurance market in New Hampshire and Nevada as a result of state waiver applications. Nevada’s request to reduce the MLR requirement from 80 to 72 percent in 2011 was granted outright, while New Hampshire received a modified version of their request. Rather than being granted a 70 percent MLR rate over the next three years, New Hampshire will be allowed a MLR phase-in, starting at 72 percent this year, 75 percent in 2012 and 80 percent in 2013.

In other MLR news, NAHU continues its work to advance H.R. 1206, the bipartisan federal legislation to remove independent agent and broker compensation from the entire MLR calculation. We continue to pick up bipartisan cosponsors in the House and now have more than 75 cosponsors. The Agent/Broker Alliance of NAHU, IIABA, NAIFAA and CIAB also continues to press for an Energy and Commerce Committee hearing on MLR as well as a bipartisan Senate companion bill. On the NAIC front, the Health Reform Actuarial Working Group is continuing to review commission data provided by NAHU, the carriers, individual states and the firm Connecture. Their goal is to determine if any pattern exists and if commissions have in fact been impacted by the new MLR regulation, or if commission changes are just a result of marketplace changes over a period of time and the economic downturn. The group will prepare a report of its findings and provide information to the NAIC’s Health and Managed Care (B) Committee and Professional Health Insurance Advisors (EX) taskforce by May 26. These two groups will then use the information determine if they should ask the entire NAIC to formally endorse H.R. 1206.

Health Care and the Federal Budget Deficit

Efforts to address federal spending and reduce the federal budget deficit will again take center stage this week in Washington. Medicare spending will remain at the forefront of these discussions, particularly following the release of the 2011 Medicare Trustee’s report on May 13, which found that the program’s trust fund will become insolvent in 2024, and today’s letter from Secretary of the Treasury Timothy Geithner to Senate Majority Leader Harry Reid (D-NV) indicating that the U.S. government has reached the debt ceiling.

Last week, Senate Minority Leader Mitch McConnell (R-KY) said Senate Republicans would seek an overhaul of Medicare and spending cuts as part of an agreement to raise the debt ceiling. McConnell said he would not insist on the conversion of Medicare to a premium support system as outlined by the House Budget Committee Chairman Paul Ryan (R-WI), but he said tighter eligibility requirements and reduced benefits for Medicare and Medicaid would have to be included in an agreement to increase the debt ceiling.

Regarding the solvency of the Medicare program, everyone agrees the program is going broke, there’s just some disagreement about exactly when. The Medicare Trustees report that, as of today, 2024 is their best estimate as to when the program will run out of money—five years sooner than they estimated last year. However, they also claim that the passage of PPACA will extend the life of the trust fund by eight years, due to cost savings and tax increases built into the law. Without PPACA, the trustees estimate that Medicare would be broke by 2016. Meanwhile, the Centers for Medicare and Medicaid Services (CMS) actuary Rick Foster issued a statement that the health care law won't really save as much money as the trustees expect because the Medicare provider payment cuts embedded in the law as a funding mechanism are unlikely to happen. According to the law today, Medicare physicians are scheduled to get a 29.4% payment cut at the beginning of 2012. Congress has historically refused to let similar cuts stand and the idea they will do so in 2012 is, according to Foster, “an implausible expectation.” In addition, Foster predicts that physicians will not increase their productivity as much as the law expects, and instead Congress will likely have raise provider reimbursement levels so that the rapidly increasing number of Medicare beneficiaries can all receive treatment.

Exchange Update

Several states took action on the creation of health insurance exchanges this week. The governor of Washington state signed a measure to create an exchange this week, and the governor of Colorado is expected to sign their exchange bill over the next few days.

Meanwhile, legislation appears to have stalled in Minnesota, Oklahoma and Oregon, and the Missouri legislature adjourned last week without taking final action on its proposal.

On the federal level, John Kingsdale, the former executive director of the Massachusetts Connector, has been hired by the federal government’s Center for Consumer Information and Insurance Oversight (CCIIO) office of health insurance exchanges to consult with them on the development of the federal fall-back health insurance exchange.

Medical Malpractice Reform Passes House Energy and Commerce Committee

On May 11, following a two-day mark-up, the House Energy and Commerce Committee passed H.R. 5, a medical liability reform bill, by a vote of 30-20. The legislation will cap non-economic damages in malpractice cases at $250,000 and set other restrictions on lawsuits against doctors.

The bill still needs to be heard by the Judiciary Committee and then, if approved by that panel, would need to be voted on by the full House, which may occur as soon as Memorial Day.

President Obama has said that he is open to working with the GOP on tort reform, but he isn’t a fan of the damages cap in H.R. 5, and Senate leadership has made it clear that the bill will not advance there. The Congressional Budget Office said the Energy and Commerce bill would save the federal government roughly $54 million over 10 years.

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