Four Democrats Introduce Bill to Tighten Spending Requirements for Medigap Policies

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Medical expenditure requirements for Medigap policies would be tightened under legislation introduced by four Democratic health care leaders in the House and Senate July 26.

Rep. Fortney Pete Stark (D-Calif.), ranking member of the House Ways and Means Committee's health subcommittee; Sen. John F. Kerry (D-Mass.); Rep. Henry A. Waxman (D-Calif.), ranking member of the House Energy and Commerce Committee; and Rep. Frank Pallone Jr. (D-N.J.), ranking member of the Energy and Commerce Committee's health committee, sponsored S. 1416 and H.R. 2645, the proposed Medigap Medical Loss Ratio Improvement Act.

The bill would amend the Social Security Act to require Medigap insurance plans in the group market to spend at least 85 percent of premium revenue on medical claims and 80 percent in the individual market beginning in 2014, according to a release from Stark. The percentage of premium dollars spent on medical claims, rather than administrative expenses or profits, is called the medical loss ratio.

The Patient Protection and Affordable Care Act requires large group health plans to spend at least 85 percent of premiums on medical claims and quality improvement as of 2011; individual and small group plans must spend at least 80 percent. Plans that do not meet the requirements must refund the difference to policyholders beginning in 2012.

Under current law, Medigap insurers are required to meet a medical loss ratio of 65 percent in the individual market and 75 percent in the group market, according to Stark. More than 9 million Medicare beneficiaries buy private supplemental Medigap policies to help cover cost sharing and deductibles.

Quality improvement measures are not included in the Medigap bill. Most Medigap policies are sold in the individual market, not the group market, a spokeswoman for Stark told BNA. The Medigap market does not differentiate between small and large groups.

“Americans have long paid to line the pockets of insurance executives with their premium dollars,” Stark said in the release. “Health reform pushes back by ensuring that consumers get improved value for their premium dollars through strong medical loss ratio standards for private health insurers and Medicare Advantage plans. Our legislation builds on those reforms by extending the same standards to Medigap plans.”

Kerry said in the release: “This commonsense bill provides another layer of protection for our seniors.”

Waxman said in the release: “Medigap plans help people fill in the gaps of Medicare cost sharing, but often have very high administrative overhead.”

The legislation has been endorsed by AARP; the American Federation of State, County and Municipal Employees; the National Council on Aging; Families USA; the Alliance for Retired Americans; the Center for Medicare Advocacy; Health Care for America Now; the National Senior Citizens Law Center; Community Catalyst; and the Medicare Rights Center, the release said.

The bill's sponsors have not asked the administration to support the bill, a spokeswoman for Stark told BNA in an e-mail.

The text of the bill is at http://op.bna.com/hl.nsf/r?Open=shad-8k5n9v .