New Medical Loss Ratios: Increasing Health Care Value or Just Eliminating Jobs? Testimony before the House Committee on Small Business Subcommittee on Investigations, Oversight and Regulations

The Patient Protection and Affordable Care Act (PPACA) already is leading to a loss of affordable options for health insurance for small employers, to a loss of jobs inside and outside the health sector, and to higher health costs that make hiring new workers a risky proposition, especially for struggling small businesses.

The percentage of small businesses offering health insurance has declined from 68 percent in 2000 to 59 percent in 2011. The health law that so many small business owners had hoped would benefit them by lowering costs is instead harming their ability to continue to offer health insurance at all. At least partly because of early provisions of PPACA, premiums for job-based health insurance rose in 2011 by an average of $1,303 per family — at the rate of 9 percent. A family policy now costs an average of $15,073.

The “medical loss ratio” (MLR), which mandates that health insurance carriers spend most of the money they collect from premiums on direct medical care, is contributing to the dislocations in the small group and individual markets, which small businesses rely on for coverage. A growing number of carriers are leaving these markets because they can’t meet the Department of Health and Human Services’ (HHS) inflexible tests.

Many states have applied to Washington to delay implementation, arguing that some carriers would be forced to stop selling policies in their states if they were not given relief from the MLR rules. This will lead to less competition and higher prices. The HHS has refused many requests, and the deterioration in available private-sector coverage already has begun. In my testimony, I provide a list of examples of companies pulling out of markets from New York to Colorado, Indiana to New Mexico, and Virginia to Utah.

One of the tools that small businesses have found to be most valuable in helping them offer affordable coverage — high-deductible health plans — could be strangled by the obscure and complex MLR regulation.

PPACA already is having a direct impact on jobs in the health broker industry. Brokers are closing their doors, laying off workers, and depriving clients of their services. A recent survey found that 21 percent of independent health insurance agency owners have been forced to downsize their businesses.

Clearly, millions of people are having their coverage disrupted, violating the promise that President Obama — and virtually all of those in Congress who voted for the law — made to the American people. As the cascade continues, support will grow for an alternative approach to PPACA. I look forward, Mr. Chairman, to talking with you and with members of the committee about a better, more sustainable path forward to affordable health insurance.

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