NEW YORK ( TheStreet) -- The nation's health insurers are still fighting to limit the affects of health-care reform on their profitability and see regulators, rather than lawmakers, as the best way to spend their political dollars. A quick comparison between the top 10 federal lobbying clients for 2010 and for the previous midterm election cycle in 2006 using data provided by the Center for Responsive Politics through their OpenSecrets.org website, shows that health care concerns dominate the insurance sector's lobbying efforts:
According to Gavin Magor, the senior health insurance analyst for Weiss Ratings (formerly TheStreet Ratings), the health insurance industry is fighting to protect its "slim-line profits" by influencing the way regulators interpret language contained in a section of the Public Health Service Act, which was incorporated in the Patient Protection and Affordable Care Act that was signed into law on March 23. The language in question concern's the health care reform act's requirement that insurers of individuals and small groups spend at least 80% of premiums on medical care or efforts to improve quality of care. This requirement increases to 85% for insurers of large groups, and both requirements are set to go into effect on January 1, 2011. Insurers who don't meet the goals will be required to rebate some premiums to customers. In order to calculate this "medical loss ratio" (MLR), the legislation says that "Federal and State taxes and licensing or regulatory fees" will be excluded from total premium revenue.
This is the crux of the lobbying battle, since health insurers are interpreting the language to mean that payroll taxes would be excluded from total premium revenue. This would make it much easier for them to meet their MLR requirements. Meanwhile, six members of Congress - including Sen. Christopher Dodd (D-Conn.) and Rep. Henry Waxman (D-Calif.) - sent a letter on August 10 to Health and Human Services Secretary Kathleen Sebelius, clarifying that the "Federal taxes and fees" referred to in the bill was meant only to include annual fees and the special tax on "high-cost employer-sponsored health coverage." The senators went on to say that "Federal income taxes or payroll taxes were not intended to be excluded from the denominator." In a letter to the general counsel of America's Health Insurance Plans -- a industry group representing 1300 health insurance companies -- the law firm O'Melveny & Myers said that the letter from the members of Congress "should not" affect the interpretation of the language in the health care reform act. The firm went on to say that the act's language was "unambiguous," containing "no qualification or limitation on the taxes." The National Association of Insurance Commissioners (NAIC) is charged with defining the standards set out in the health care reform act, which will then be certified by Secretary Sebelius before January 1. While it's reasonable to assume that the NAIC and Health and Human Services Secretary will agree with the clarifications set out in the letter from the members of Congress, Magor said "this one will be settled in the courts."