The federal government chose to deny Wisconsin’s request to delay a bill requiring insurance companies to spend 80 percent of their profits on medical expenses last Thursday.
The bill, titled the Patient Protection and Affordable Care Act, would require insurers selling policies to individuals to spend at least 80 percent of their premiums on direct medical care.
The bill would affect companies that sell health care plans on the individual market, according to Robert Kraig, head of Citizens Action of Wisconsin, an organization that mobilizes citizens to participate in political advocacy.
By seeking to delay the bill, Gov. Scott Walker tried to give insurance companies that had less than 80 percent of their profits going to health care costs time to adjust to the new policy, Kraig said. Proponents of the delay argue insurance companies would leave Wisconsin rather than raise their health care costs.
“Insurance companies view health care costs as a loss, and some companies would like to keep more profits in order to raise employee salaries and give CEO’s year-end bonuses,” Kraig said.
Most companies already operate above 80 percent, but companies that do not, including Golden Rule, Time and Humana, would have to pay an estimated $14 million in rebates, according to Kraig.
Medicare gives 97 percent of its profits to medical care and University of Wisconsin student health insurance gives 95 percent of its profits to doctors, Kraig added.
Kraig said it is important to remember that private companies operate with “huge profits.” Humana, for example, turned a profit of nearly $1 billion dollars last year, he said, and most companies are already within the limits of 80 percent.
J.P. Wieske, head of the Wisconsin Office of the Commissioner of Insurance, said he favored the delay and said its denial was politically motivated.
“We had hoped this decision would have been made outside of politics, but it is clear that the Obama administration has at least one eye on the reelection campaign,” Wieske said.
Rep. David Craig, R-Veron, said in a statement the federal government has no reason to expect any authority over the minimum insurance companies spend on health care in individual states.
However, Kraig said federal laws over minimum wage and child labor laws effectively bypass states’ rights and the minimum medical loss ratio falls under that same category. He also said rising insurance costs is a nationwide phenomenon and consumers everywhere are struggling to afford insurance.
The Walker administration did not publicize the letter for a proposal of delay. Citizen Action of Wisconsin brought the public’s attention to the letter only after learning, through an advocacy group in Washington D.C., that Walker was trying to delay the 80 percent ratio ruling.
Kraig said Walker’s willingness to defend the insurance companies shows a loyalty to the businesses of Wisconsin and ignorance to the struggles of citizens.
Although he is still analyzing the rejection letter received late Thursday evening, Wieske said his office would respond to the denial in coming days and that he is still analyzing the decision.