To be successful, any plan intended to provide senior citizens on Medicare with more private-sector health insurance options must be attractive to insurers, or none will participate.
In an effort to provide Congress and the Bush administration with guidance on how to address such issues as health plan accountability, financial solvency, access, and pricing, the Council for Affordable Health Insurance (CAHI) enlisted the help of actuaries and insurance and health policy experts to produce “A How-To Manual for Modernizing Medicare,” unveiled on June 11.
Critics of private-sector options worry private companies will mishandle funds or commit accounting fraud. How can consumers be protected? Here are some of the answers.
Plan Status and Solvency
- States already monitor insurers’ compliance with accounting standards and their financial status. State-required reports should be copied to the federal government so that a federal agency is informed of the plans’ status.
- Many states have established a guarantee fund association, regulated by each state’s department of insurance, to protect consumers against insurer insolvency. Insurers offering private Medicare plans should be required to participate in a guarantee fund in those states where they sell Medicare policies.
- One of the first complaints about private plans will be that insurers will charge seniors premiums that are too high. Fortunately, there is an easy way to guarantee insurers charge only what they need to cover losses, plus administrative costs: a minimum-loss ratio, which says claims paid by the company must be equal to a certain percentage of the premium taken in (e.g., the claims paid must be at least 65 percent of premium received). That model is supported by the National Association of Insurance Commissioners and is already working in many states.
“The key to giving seniors more choices is to ensure that lots of private insurers participate in Medicare,” said Dr. Merrill Matthews Jr., Ph.D., director of CAHI. “The ‘How-To Manual’ provides a blueprint for how to modernize Medicare and highlights what states are already doing to address some of the most difficult issues.”
The Alexandria, Virginia-based CAHI is a research and advocacy association of insurance carriers active in the individual, small group, medical savings account, and senior markets. CAHI’s membership includes health insurance companies, small businesses, physicians, actuaries, and insurance brokers.
Tom Gardner is director of communications for CAHI. He can be reached by phone at 703/836-6200, extension 386, or by email at [email protected].
CAHI’s “How-To Manual for Modernizing Medicare” is available on the Internet at http://www.cahi.org. Or call 703/836-6200.