CAHI Releases Medicare Reform 'How-To' Manual

6/11/2003

From: Tom Gardner of the Council for Affordable Health Insurance, 703-836-6200 ext. 386; http://www.cahi.org

ALEXANDRIA, Va., June 11 -- Any plan intended to provide seniors 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 some guidance on how to address issues such as to 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 address these questions. The result is "A How-To Manual for Modernizing Medicare," which can be found at http://www.cahi.org.

For example, critics of private sector options raise concerns that private companies can mishandle funds or commit accounting fraud. So, how can consumers be protected? Here are some of the answers.

On financial status:

-- States already monitor insurers' accounting standards and financial status. State-required reports should be copied to the federal government so that a federal agency is informed of the plans' status.

On financial solvency:

-- Many states have established a guarantee fund association, regulated by each state's department of insurance, to protect consumers against insurer insolvency. All that is needed to meet this requirement is that insurers offering private Medicare plans participate in a guarantee fund in those states where they sell Medicare policies.

On the cost of policies:

-- One of the first complaints about private plans will be that insurers will charge seniors too much for the premiums. Fortunately, there is an easy way to guarantee that insurers are only charging what they need to cover losses, plus administrative costs: a minimum-loss ratio, which says that the 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 CAHI Director Dr. Merrill Matthews Jr. "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."

For more information on Medicare reform, CAHI's "How-To Manual" or to schedule an interview with CAHI Director Dr. Merrill Matthews, contact Tom Gardner, director of communications, at tgardner@cahi.org or 703-836-6200 ext. 386.

CAHI is a research and advocacy association of insurance carriers active in the individual, small group, MSA, and senior markets. CAHI's membership includes health insurance companies, small businesses, physicians, actuaries, and insurance brokers. Since 1992, CAHI has been an advocate for market-oriented solutions such as MSAs to the problems in America's health care system.