Health care amendment becomes a feather in Franken's cap

An amendment to the Senate health bill that was a bit of a coup for Minnesota Sen. Al Franken and West Virginia Sen. Jay Rockefeller would change the way a lot of insurers do business.

But not in Minnesota.

The amendment requires insurers to spend at least 85 percent of premiums from large group policies on medical care, as opposed to profits, marketing or administrative costs.

For small groups and individuals, insurers would have to spend 80 percent on medical care. Insurers who don't meet those targets must give policyholders a rebate.

However, most Minnesota health plans, dominated by not-for-profit groups, already are there.

"We don't think it will have much of an impact," said Donna Zimmerman, vice president of government and community relations for HealthPartners, the state's third biggest health insurer. "We already have some of the lowest administration fees throughout the country."

Minnesota plans already pay out 85 to 90 percent of premiums in medical costs, Zimmerman said.

The ratio of medical costs to premiums is commonly known as "medical loss ratio" or MLR because it is what insurers "lose" to medical costs. State law already requires an MLR of 72 percent for individuals and 82 percent for small groups.

One large national for-profit insurer, Minnetonka-based UnitedHealth Group, had an MLR of 84 percent for 2009.

Franken had higher target

According to Franken, only 70 percent of premiums now go to medical care nationally so the requirement is likely to have a bigger impact in other states.

Like so much else in the massive Senate health legislation, the amendment was the result of months of negotiations.

In September, Democrats Franken, Rockefeller and others in Congress proposed that insurers be required to spend at least 90 percent of premiums on medical care. After the non-partisan Congressional Budget Office said that would turn private health insurance into "an essentially governmental program" by placing overly stringent requirements on the industry, a compromise was reached.

In a conference call with reporters Sunday afternoon, Franken said he is "very happy that we got to 85 [percent]." He cited the MLR requirements as an effective alternative to the nixed government-run plan in holding private health insurers accountable.

"I remain deeply disappointed the public option isn't part of the bill," Franken said. "But this is a very potent measure that Sen. Rockefeller and I have been fighting for to limit insurance profits and really put the brakes on skyrocketing insurance premiums."

Though Minnesota health insurers are not likely to be greatly affected, that doesn't mean they don't have a lot of questions.

"We are studying it to determine the impact on Minnesotans," Julie Brunner, executive director of the Minnesota Council of Health Plans, said Monday. "As we understand it now, implementing this section of the bill would be very complicated."

Among the questions that remain: What about yearly fluctuations in medical costs? Would state taxes or fees be considered administrative costs? Are disease management costs administrative or medical?

And finally, what about high-deductible plans, which have high administrative costs? For example, HealthPartners' individual policies with high deductibles and health savings accounts had an average MLR of 64 percent last year, compared with 99 percent for traditional HMO policies.

"That's why this gets to be pretty tricky," Zimmerman said.

Staff writer Eric Roper contributed to this article.

Chen May Yee 612-673-7434