The New Medical Loss Ratio Rule means No Bronze Plans, and No HSAs in ObamaCare Exchanges

The urge of government health care bureaucrats to impose their will on the market, regardless of warnings and repeated petitioning for redress for relief, overpowered petitions in the latest medical loss ratio (MLR) rule by HHS.

The result of the new rule will mean one thing: no bronze plans, at all, in the ObamaCare exchanges. (Bronze plans are the low cost plan that ObamaCare envisioned in their exchanges.)

The future of the exchanges is clear — it will be populated with expensive plans for the less healthy. The healthy will simply go without insurance or find it outside the exchanges — at least until they become sick.

The government bureaucrat’s “management” of the market is management by bias. This bias has resulted in the bureaucrats rejecting out-of-hand, simple fixes for simple problems with the medical loss ratio rule.

For example, the health savings account qualified health plan, and other health plans with healthy deductibles, cannot meet the the MLR limits set by the rule. Not because HSA qualified plans are inherently incapable of meeting the MRL limits, but because the rules of how MLR is computed discriminates against HSAs and other health plans with higher deductibles.

How does the MLR rule discriminate against bronze plans and HSAs? Here’s how: any payment for a health care service below the deductible by an individual or family does not count in the weird and bizarre world of the government bureaucrats MLR. Payments for health care services by insurers do count, but not payments by individuals.

To repeat, just so everyone is clear: If an insurer pays for a health care service for their insured, the MLR rule counts that in their MLR rule. But if an individual pays for a health care service to meet their deductible, the MLR rule does not count that expenditure.

Only five percent of those with an HSA qualified health plan in a year have any claims paid by their insurance. Therefore, it is a mathematical impossibility for HSAs to meet the MLR limits when the new HHS rule allows only five percent of HSA payments for health care services to count towards their MLR limit.

But the bureaucrats at HHS simply don’t care or they think they know better — or both.

They were told in person, in writing, by Congress and repeatedly by others.

The result will be no bronze plans in the exchanges, should the Supremes not make the law null and void.

This is what happens when bureaucrats meddle and interfere. Fairness is ignored. Common sense goes out the window. Welcome to the irrational world of government run health care.

Without a low cost option, more people will go without insurance (mandate or not) and the average cost of a health plan in the exchanges will skyrocket. Obviously, then, fewer people will be able to afford it and subsidies will have to grow to help finance the increased cost.

And guess what? The the one-size-fits-all bureaucrats will be firmly in charge of a yet another massive health care cost spike — with no HSAs or bronze plans to meet the crying need for low cost health plans.

But self-insured or ERISA plans are exempt from the MLR regulation. So, large employers whose employees have an HSA can keep them, for now. Or, at least until large employers start dumping their employees off their health insurance rolls to save paying for health insurance, since the tiny penalty for not providing health insurance is cheaper per employee, than purchasing health insurance.

HSAs will survive in a world where large employers don’t dump their employees into the ObamaCare exchanges. In the fully insured market, since HSAs cannot make the MLR limits rigged against them by HHS, insurers will have to “borrow” MLR credits from their other plans that don’t have the MLR rules rigged against them. This will provide HSAs some relief, but this will cap the number of HSAs allowed to exist outside the ObamaCare exchanges.

The word on the street is that HHS believes it can craft an essential benefits rule that may mitigate the rigged MLR regulation that strangles HSAs and other Bronze plans – not to help HSAs – but to allow non-HSA high deductible health plans to exist in the ObamaCare exchange. This more bureaucrat hubris – the Soviet-like urge to control — in action. They are wrong about manipulating the yet-to-be-published essential benefits rule to allow some Bronze plans. It’s not mathematically possible with their rigged MLR regulation. But, here’s a newsflash: the bureaucrats aren’t listening.

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1 Response

  1. December 12, 2011

    […] Perrin, of the HSA Coalition, notes another consequence — instead of lowering the cost of coverage, the MLR will raise it. He argues that lower-cost […]

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