Hearing of the House Committee on Rules - Affordable Care Act


Date: Jan. 6, 2011
Location: Washington, DC

Congressman John Tierney today introduced an amendment to ensure that patient care is protected even as Republican leaders continue their misguided attempt to repeal health care reform. Tierney is expected to testify today in front of the powerful House Rules Committee to urge that his amendment, which protects a provision that he successfully included in the health care reform bill last year that requires insurers to spend 80 to 85 percent of health premiums on medical care, rather than administrative costs, be given a vote on the House floor.

"As the new Republican Congress continues its irresponsible efforts to repeal health care reform, it is imperative that we protect common sense measures that put patients first and keep insurance companies in check," Congressman Tierney said. "While I intend to oppose any attempt to repeal health care reform on the House Floor, I am working to see that a vote occurs on my amendment that would ensure that health insurance companies do not put profits and bonuses ahead of the health care of their customers. It is imperative that Members have an opportunity to vote on this amendment because, regardless of where one stands on the health care reform law, we should all be able to agree that measures such as this one remain law."

The Patient Protection and Affordable Care Act, which was signed into law last year, put in place comprehensive reforms to hold insurance companies accountable, strengthen Medicare, and lower health care costs. During the debate last year, Congressman Tierney took a leading role in the successful effort to ensure that insurance companies place their customers' health ahead of their own inflated salaries, bonuses, profits, and lobbying efforts. The amendment he offered today would protect this provision, regardless of Republican efforts to repeal the Affordable Care Act.

Below, please find a copy of Congressman Tierney's testimony, as prepared for delivery to the House Rules Committee later today.

Statement of Congressman John F. Tierney

As Prepared for Delivery

January 6, 2011

Thank you Chairman Drier, Ranking Member Slaughter and members of the Rules Committee. I appreciate the opportunity to be here today.

Today we discuss an idea first broached in 1912 by Republican President Theodore Roosevelt -- National Health Reform. Unfortunately, the New Majority has chosen to use its first opportunity to try to undo the health reform afforded the American people in the last Congress.

Before speaking directly to the amendment I have offered, I want to acknowledge that many of my colleagues have put forward amendments that I believe should be made in order under the rule. My colleagues' amendments retain important aspects of the Patient Protection and Affordable Care Act that preserve important, common-sense consumer protections which ensure that necessary assistance to seniors and small businesses can continue.

These amendments prevent insurance companies from imposing devastating annual and lifetime caps, dropping coverage once people get sick, and denying it based on a pre-existing condition. These amendments enable young people to continue to remain on their parents' insurance plans until the age of 26. This is particularly critical in today's challenging economy, as youth unemployment is just shy of 20% and record numbers of unemployed college graduates are being forced to move back in with their parents.

These amendments ensure that our seniors will not be denied a 50% discount on prescription drugs.

These amendments preserve the small business health care tax credit, which allows small businesses to cover up to 35% of their health insurance costs through 2013, and up to 50% of insurance costs beginning in 2014.

Mr. Chairman, the bill that is expected to come to the House floor repeals the entirety of the Patient Protection and Affordable Care Act. I supported that Affordable Care Act, and still do. But, even for those of you who didn't, you likely have supported some of its parts. Your constituents have and are continuing to benefit from its parts, and I would respectfully ask that you retain the parts specified in these and other amendments offered today.

Now, the amendment I have filed holds insurance companies accountable and ensures consumers are receiving the health services for which they are paying top dollar.

Seventeen of my colleagues have co-sponsored this amendment, which specifically retains the provision in the Patient Protection and Affordable Care Act related to the medical loss ratio -- or MLR -- requirement. As you know, the MLR represents the portion of premium revenue insurers pay out to doctors, hospitals, and other health care providers -- in other words, for health care. Insurance companies have been spending ever-growing portions of our premiums for salaries, profits, lobbying, advertising, marketing and other overhead.

According to published Families USA reports, prior to the passage of the Patient Protection and Affordable Care Act, there were little to no protections in place that would ensure consumers health premiums would be used for medical services rather than for insurance company profit, administration and advertising.

Ever since 1993 in particular, when not-for-profits like BlueCross Blue Shield went to for-profit status and consolidated, the relentless consolidation and market concentration in the industry has left consumers with diminishing choices -- and subject to industry overreach.

Recent data on the profits of the 10 largest for-profit insurance companies in this country show a whopping $9.3 billion in profits for the first three quarters of 2010. These profits are $2.1 billion higher than the first nine months of 2009. On average, the profits of these insurance companies have gone up 41 percent from 2009.

History has clearly shown us that many insurance companies care more about excessive salaries and bonuses, and using premium dollars on overhead, marketing and other administrative costs, rather than putting that money back into health services for their consumers.

As one prominent grass-roots Health Care advocacy group noted, the provisions in the Affordable Care Act related to the MLR standards are "critical to ending the industry's anti-consumer practices, controlling rising premium costs, squeezing value out of premiums paid by private and public customers and ending the relentless profiteering of health insurance companies."

Needless to say, I believe the MLR provision in the Patient Protection and Affordable Care Act is an extremely important consumer protection for Americans.

Specifically, starting on January 1, 2011, the law requires insurance companies in the individual and small group markets to spend at least 80 percent of the premium dollars they collect on medical care and quality improvement activities. Insurance companies in the large group market must spend at least 85 percent of premium dollars on medical care and quality improvement activities.

If the insurance companies do not meet this requirement, they will be required to provide a rebate to their customers starting in 2012. If the law had been on the books in 2009, the six largest private insurance companies would have refunded $1.9 billion!

Also beginning this year, the law requires that insurance companies publicly report how they spend premium dollars.

This information will provide consumers with meaningful information on how their premium dollars are spent, clearly accounting for how much money goes toward actual medical care and activities to improve health care quality versus how much money is spent on administrative expenses like marketing, advertising, underwriting, executive salaries and bonuses.

This will surely make the insurance marketplace more transparent and make it easier for consumers to purchase plans that provide better value for their money.

Lest you feel the MLR standards in the Act are unreasonable, you should know that in 1993, before privatization of formerly not-for-profits like Blue Cross, Blue Shield, and the consolidation and concentration within the industry that adversely affected consumer bargaining power, the typical plan spent 95% of a premium dollar on health care.

In 2009, a number of the largest insurers in fact showed they could meet the standard by using only 15% of premiums for administrative costs and profits. Self-insuring companies generally spend only 10%, and Medicare spends just 3%. The typical insurer under the FEHBP averages 95%.

Unfortunately, the industry has found that they can get away with using the premium dollar as a profit center and a 2008 study found many companies spending only 60 cents of every premium dollar on health care.

A U.S. PIRG May 2009 report determines some MLRs as low as 57.3% where consumer protections are weakest.

In fact, according to the Department of Health and Human Services, the MLR provision will protect up to 74.8 million insured Americans in 2011 and estimates indicate that up to 9 million Americans could be eligible for rebates starting in 2012 worth up to $1.4 billion.

The average rebates per person could total $164 in the individual market.

Unfortunately, one of the many negative consequences of the bill that will come to the House floor next week is that it will end the MLR requirement.

Those supporting the underlying bill should know that, among other things, it will mean insurance companies could charge very high premiums to individuals and spend a startlingly low proportion of these premium dollars on health care services.

This is unacceptable.

The choice is clear. Let's be on the side of consumers, not insurance companies.

Finally, I would respectfully remind the Chairman and other Republican Members of this Committee that, when Democrats controlled Congress the last four years, you and your colleagues often criticized so-called "closed rules" and argued for an open process so Members on both sides of the aisle had the opportunity to do what we all came here to do: legislate.

Along those lines, you may recall, Mr. Chairman, that, last February during floor debate on health care legislation that would restore the application of antitrust laws to health insurance companies, you expressed concern to Congresswoman Slaughter about the paucity of open rules.

At that time, you said "this isn't a partisan issue. This is to do with the American people having their voices heard in this institution."

I agree with you, Mr. Chairman.

Additionally, just yesterday, during his initial address to the House, Speaker Boehner echoed the importance of openness.

He said it was a misconception that "allowing additional amendments and open debate makes the legislative process "less efficient' than our forefathers intended."

The Speaker went on to say that openness would be the "new standard" with "many" open rules this Congress.

I say let this "new standard" begin right here, right now with this bill -- and I ask that you craft a rule that makes my amendment and the others I mentioned in order.

Again, I thank you for the opportunity to testify today.