Regulatory Capture, Cont'd


Dan Froomkin now sizes up the insurance industry’s next move, and agrees that they will scrap for every advantage to turn the ACA even more to their advantage[.]

When the focus is on, as it was on the insurance companies' argument that they could elude the prohibition on discrimination against children with pre-existing conditions, the regulators won't be captured. But the Secretary of HHS can not maintain that level of scrutiny, even if they wanted to. And the assault will be constant. Here is the latest:

In the March 17th message, WellPoint — the nation’s largest insurance company — announced that it has reclassified some of its administrative costs as medical spending in order to increase its medical loss ratio (MLR, a techinical terms which measures how much insurers spend on administrative spending v claims).

The inherent weakness of the reforms in the health bills is its dependence on regulators to insure that the benefits that are designed to go to consumers actually do so. the history of insurance regulation is not confidence inspiring.

Speaking for me only

< Triangulation | Thursday Morning Open Thread >
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    Regulating an industry is expensive. (5.00 / 3) (#1)
    by inclusiveheart on Thu Apr 01, 2010 at 08:45:34 AM EST
    Really expensive if you are doing it right.

    But never mind.

    Obama got "something" passed.

    And for those of you who are dissatisfied with that something:

    The beatings will continue until morale improves.

    He pretends to govern (5.00 / 4) (#3)
    by Salo on Thu Apr 01, 2010 at 08:48:36 AM EST
    As the corporations pretend to pay taxes.

    And we pretend to have jobs! (none / 0) (#40)
    by lambert on Thu Apr 01, 2010 at 01:42:24 PM EST
    Or health care....

    Considering (5.00 / 1) (#12)
    by lilburro on Thu Apr 01, 2010 at 09:26:31 AM EST
    the recent formation of, as atrios calls it, the Big Sh*tpile, it is quite amusing to think regulatory muscle will be used by either Dem or Republican administrations.

    From what I understand (none / 0) (#5)
    by cawaltz on Thu Apr 01, 2010 at 08:52:23 AM EST
    California got so tired of the time and expense involved in trying to regulate Blue Cross Blue Shield that they were getting away with quite a few blatant violations. It was easier to regulate the smaller ones that couldn't afford to mount a fight but the bigger insurance companies are going to be problematic.

    And as a result there will ultimately (5.00 / 1) (#6)
    by inclusiveheart on Thu Apr 01, 2010 at 09:01:39 AM EST
    be few to no small providers and a handful of too-big-to-fail mega insurers who will do the same to the feds.

    All a clever Congress or President have to do to fully unbridle them is to reduce funding for HHS to the point where they simply can't keep up.

    Our immigration problems have a lot to do with the fact that the agency has been terribly underfunded for years now.  That was a backhanded way of preventing people from emigrating legally to this country.


    Where does this... (none / 0) (#11)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 09:25:59 AM EST
    ..."understanding" from?  

    Certainly doesn't appear to be the case at all. Two recent actions against ABC...

    California Insurance Commissioner Steve Poizner today announced that an investigation of consumer complaints filed against Anthem Blue Cross' claims handling practices has uncovered more than 700 violations of state law.



    California Insurance Commissioner Steve Poizner today announced that Anthem Blue Cross has agreed to a Feb. 8 request by Commissioner Poizner to delay their individual health insurance rate increase until May 1 to allow an independent actuary to review their rates.

    "I'm pleased by Anthem Blue Cross's decision to delay their rate increases for two months to allow independent actuaries hired by the California Department of Insurance (CDI) to closely scrutinize their 2010 rates," said Commissioner Poizner. "We have instructed the actuaries to review the rates with a fine tooth comb to ensure they comply with state law that requires that 70 cents of every dollar in premiums is spent on medical benefits. Should they find that these rate increases were unwarranted, I will immediately take action to get Anthem Blue Cross to follow the law and lower their rates."



    Did you look at the dates of the violations (5.00 / 2) (#30)
    by cawaltz on Thu Apr 01, 2010 at 12:52:54 PM EST
    and ask yourself why a case from 2004 is just bein reviewed and the company is just being fined now?

    Furthermore, I know you aren't a neophyte. When health care became a spotlight issue did you not think that maybe there would be a "crackdown" on the insurance companies?

    Additionally, here's an article that details how even though Blue Cross was fined the statenever followed through because they worried it would be torpedoed in court.



    No, I don't. (5.00 / 1) (#34)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 01:21:39 PM EST
    But then, I know how the process works.  MCE's are always done on a "look-back" basis and the law requires a time frame for Company responses and appeals.  Like all wheels of justice, the process is meant to be deliberate and fair, not swift and one-sided.

    There is no "crackdown" because of the latest "spotlight".  Companies are targeted for examination for any number of reasons.  It's not like all of the sudden a light was shone on these issues--we've been looking for these same things year after year after year.  

    As to your contention that CADMCH (not the DOI, BTW) never followed through...



    Taken directly from the article (none / 0) (#36)
    by cawaltz on Thu Apr 01, 2010 at 01:28:26 PM EST

    "This same state agency, the Department of Managed Health Care, fined Anthem Blue Cross $1 million in March 2007 for "routinely rescinding health insurance policies in violation of state law." Sadly, that fine was never collected. Agency officials admitted to The Associated Press that they didn't even try to enforce the fine because they feared they could be torpedoed in court."

    Are you basically saying that the Department of Managed care officials in California are LYING?

    They admitted that they didn't try to enforce the fine and they explain pretty clearly WHY they did so.

    Furthermore, if you read further down they admit that it was way easier to go after the smaller companies and enforce compliance because they did not have to run the time and money guantlet they do with the larger companies.


    Interesting... (none / 0) (#41)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 01:53:43 PM EST
    ...that foregoing a million dollar fine subject to a protracted court battle and instead getting a ten million dollar settlement and restoring coverage to affect persons is somehow a failure of the regulatory system.  

    Got it.  


    They're getting settlements right now (none / 0) (#43)
    by cawaltz on Thu Apr 01, 2010 at 02:07:31 PM EST
    and you still aren't refuting the fact that the enforcement agency THEMSELVES admit they did not enforce stuff from back in 2007 which was my original statement.

    Go back and reread what I said and let me know what was factually wrong with it.


    Sorry... (none / 0) (#45)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 02:19:27 PM EST
    ...I don't take orders from you.  If you can't understand the reasons behind what they did and what the pay-off of those actions were, then I can' help you.  

    One last time...

    $1 million plus court case < $10 million plus reinstatement of coverage

    Have a nice day.


    They explain the reasons behind (none / 0) (#47)
    by cawaltz on Thu Apr 01, 2010 at 02:42:02 PM EST
    what they did. It was pretty clear in the article. They forwent it not because they were seeking a 10 million dollar settlement but because they feared that going after the million dollar fine in court would get torpedoed.

    It's great that in your imagination the facts are different then how the regulatory agency itself lays it out though. You have a nice day too!


    Taken directly from the dept. director (none / 0) (#48)
    by cawaltz on Thu Apr 01, 2010 at 02:52:58 PM EST
    The department's director, Cindy Ehnes, told The Associated Press on Thursday that, when it comes to rescissions, the agency has had success in forcing smaller insurers to reinstate illegally canceled policies and pay fines, but Blue Cross is too powerful to take on.

    "In each and every one of those rescissions, (Blue Cross has) the right to contest each, and that could tie us up in court forever," Ehnes said of the approximately 1,770 Blue Cross rescissions between Jan. 1, 2004, and now.

    I'm glad that from those statements you were able to garner that the regulators were sufficiently empowered. Which part of Blue Cross is "too powerful to take on" did you equate with regulatory victory?

    Heh it's only 1,770 people right? Recissions, schmissions.


    Hmm (5.00 / 1) (#38)
    by TeresaInSnow2 on Thu Apr 01, 2010 at 01:37:20 PM EST
    "I'm pleased by Anthem Blue Cross's decision to delay their rate increases for two months to allow independent actuaries hired by the California Department of Insurance (CDI) to closely scrutinize their 2010 rates," said Commissioner Poizner.

    He's pleased -- PLEASED? that they're waiting 2 months to implement the increase?  He says that as if, as a regulator, he has no regulatory power to stop these increases (hint: he has no real power)

    "We have instructed the actuaries to review the rates with a fine tooth comb to ensure they comply with state law that requires that 70 cents of every dollar in premiums is spent on medical benefits. Should they find that these rate increases were unwarranted, I will immediately take action to get Anthem Blue Cross to follow the law and lower their rates."

    You know my state did something similar to this toward Regence, in Regence's third year of double-digit premium increases for individual insurees.  I'm happy to report that Regence was forced to trim a whole fraction of a percent off the 17% increase that they finally enacted.  (The proposed increase was around 17.6% and the final increase 17%). So yes, expect some trimming.  Don't expect much.

    Because of this third year of increase, I had to drop to a catastrophic plan.  Under the wonderful new insurance law, I won't have the option of dropping insurance coverage when they raise rates like this.  So, don't worry, be happy, because we have wonderful insurance regulators to protect us....and when these wonderful regulators throw up their helpless hands during the next increase I'll make sure and set up a pay-pal account to solicit donations from the ever-so-naive-about-regulatory-ineffectiveness pom-pom holders.


    Let's be careful here. (none / 0) (#13)
    by Salo on Thu Apr 01, 2010 at 09:49:28 AM EST
    That sounds like an expensive process. And California actually has a serious commish. That's not replicated in every state, I can't accept that Mississipi can or would elbow a corporation the same way a Californian commish could. By all  means prove me wrong. There's not enough will or cash to catch the maliciousness.  Additionally, I think you should go bak to the parent comment. Cawaltz is a curmudgeon and I tend to take most things he says with a pinch of salt.

    under the new law (5.00 / 1) (#14)
    by CST on Thu Apr 01, 2010 at 09:51:54 AM EST
    would enforcement of regulation be mostly left up to the states running the exchanges or the Fed?

    I have a lot more faith in the Fed than I do a state like Mississippi.  Although I have more faith in some states than I do the Fed.


    State based exchanges (none / 0) (#16)
    by MO Blue on Thu Apr 01, 2010 at 10:02:50 AM EST
    It depends. (none / 0) (#17)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 10:04:50 AM EST
    If a State (via the Legislature) decides to opt-out, then HHS will be the defacto regulator of the exchange.  If not, then the State remains the regulator.  

    However, in both cases, the States are still responsible for enforcement of their own insurance statutes and regulations.


    Curmudgeon: (5.00 / 1) (#21)
    by hookfan on Thu Apr 01, 2010 at 10:18:51 AM EST
    A crusty, ill tempered person full of resentment and stubborn notions. According to Merriam usually male and old.
     hey! I'm the resident curmudgeon. I've worked sixty years on earning the title and I wont give it up easily to Cawaltz without a fight!
    Besides 1)Cawaltz is female (nyah, nyah), and 2)You better take more than a pinch of salt to manage my outrageous perspectives and stubborn statements, so she doesn't merit the title.

    Heh (5.00 / 1) (#44)
    by cawaltz on Thu Apr 01, 2010 at 02:14:47 PM EST
    I aspire to be that cartoon charecter Maxine when I hit my sixties. It's good to know that I'm almost there and I'm only in my forties. I'm ahead of the curve and overachieving. Woohoo!

    I've been everything from bitter to Republican(oh and the other day on another board I got called breeder it's one of my personal faves), I'm pretty much teflon when it comes to namecalling. My personal philosophy is like me or hate me I am who I am. As for being stubborn, I prefer the term determined but heh, I'll be darned if stubborn don't fit if you're sitting on the other side of a debate from me. I definitely have the strong willed gene.


    I read something to that effect also. (5.00 / 1) (#23)
    by Joan in VA on Thu Apr 01, 2010 at 10:41:04 AM EST
    It wasn't that the insurance commission wasn't serious but that when the case inevitably ended up in court, the insurer had vast legal resources that the state didn't have so the insurer usually won. It was a woman in CA that was quoted but it was some time ago and I don't even remember where I read it to find it again.

    Huh. (none / 0) (#24)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 11:11:49 AM EST
    That certainly flies in the face of the reality of my experience.  

    Very few of our actions end up in front of an ALJ or district court.  Certainly not "inevitable" that they do.  And when they do, the insurers rarely, if ever "win".  In fact, we've never lost a court case in all the years I've been around.  It's hard for a Company to argue "legislative intent" against the very people who write the statutes and regs.  

    Not to mention the fact that we have an entire staff of AAG's that are more than a match to any Company's "vast legal resources" (ie, outside council).  


    And, of course, the state is the (none / 0) (#26)
    by oculus on Thu Apr 01, 2010 at 11:24:23 AM EST
    proverbial "deep pocket."  Bottom line:  state's lawyers are on salary--not billable hours.

    As are all State employees... (none / 0) (#28)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 12:11:39 PM EST
    ...including staff regulators.  Contract examiners are not, but that cost is borne by the Companies being examined.  

    These facts tend to invalidate the argument that conducting examinations is cost prohibitive proposition for the State.


    The eye of the beholder (none / 0) (#33)
    by christinep on Thu Apr 01, 2010 at 01:18:10 PM EST
    MileHi: The differences here may stem from points of view and perceptual screens more than actual or expected practice. My experience with expansive regulations--mostly pursuant to the environmental CAA, CWA, RCRA, and TSCA--showed general patterns of increasing compliance over the years as experience grew in the regulated community. Fears that there would be all sorts of deceptions and commonplace flaunting of the law really did not occur. Sporadic violations, certain recalcitrant companies and industries, surprising arguments...yes, all these happened. Timely, well-publicized, strategic enforcement--with significant Agency wins--were central to increasing compliance rates. That seems to be your point, I take it? (And, I agree.) Yet, until the applicable regs are promulgated and the process kicks into high gear, we should expect skeptics/opponents to keep up the "it can't be done" refrain. That type of chant is traditional for all major legislation, isn't it?

    Yes... (5.00 / 1) (#37)
    by MileHi Hawkeye on Thu Apr 01, 2010 at 01:33:54 PM EST
    ...but like you--I'm a glass half-full type, rather than the Chicken Little crowd that tends to populate the threads here at TL.  

    I have no patience for people who think present themselves as experts without truly understanding how the process really works.  

    Business trying to exploit loopholes?!  OMG--we should just throw up our hands and give up!11!

    Homey don't play that.


    My statement stands (none / 0) (#46)
    by cawaltz on Thu Apr 01, 2010 at 02:20:44 PM EST
    and you can all me all the names you like.

    The California regulatory agency themselves admit that they forwent enforcement because of the time and expense of pursuing the big boys.

    If you can't believe THOSE THAT ARE ACTUALLY INVOLVED IN THE REGULATORY PROCESS IN THE STATE IN QUESTION (which is where I took my information from) I don't know what to tell you.

    Namecall away though


    Strategic Enforcement (none / 0) (#49)
    by christinep on Thu Apr 01, 2010 at 04:03:41 PM EST
    Not speaking for or about the particular incident to which you refer, cawaltz, I can offer the observation that responsibility for an enforcement program presents a series of choices. Insofar as I am aware, not every alleged violator in a civil program will be tracked down to the four corners. That is not sarcasm; it is strategy. Managing a civil enforcement program involves a set of strategies that reflect a number of imperatives (and they change periodically in consideration of the emphasis needed at the time in the program, the community status, the age of the program, etc.) Sometimes, in my career, it was important to "run up the numbers" and sometimes it was more important to do the one or two big cases. Obviously, you want to respond to every incident/challenge in a timely manner all the time. But, there usually are resource constraints and considerations about what gets the most enforcement deterrence. Enforcement in the civil regulatory arena combines compliance assurance and deterrence. This sounds like a lecture (old habits), but I mean to portray it as strategic actions. Sometimes--as in a dance-- you stumble; sometimes you get all the steps right. You try. One thing I do know is that regulatory agencies in this day and age do take heed and notice when concerns are directly expressed by citizens.

    Feel free to read my above response to MileHi (none / 0) (#35)
    by cawaltz on Thu Apr 01, 2010 at 01:22:56 PM EST
    It CAN and DID occur. Unless you want to refute the actual people in California's regulatory infrastructure and say they are fibbing.

    I found one of the articles (none / 0) (#31)
    by cawaltz on Thu Apr 01, 2010 at 12:54:09 PM EST
    and posted it in my response to MileHi.

    Needs to be reitterated (5.00 / 1) (#2)
    by Salo on Thu Apr 01, 2010 at 08:45:35 AM EST
    The government needed to set up a model programme. So that private products could be weighed against it. Thus the importance of a PO. ( robust or weak it could have been a metric to assess abuses)

    Anything small on the public side (5.00 / 1) (#8)
    by inclusiveheart on Thu Apr 01, 2010 at 09:04:54 AM EST
    will be deemed statistically insignificant - and likely will have its own problems stemming from the pool being too small and the participants being cast offs from the private system.

    Actually, had the insurance lobby been really clever, they would have allowed something along these lines to be created.  They let us have the Medicaid expansion, though.  But why not?  Those people are generally unable to pay anyway, right?


    Not so sure (none / 0) (#9)
    by Salo on Thu Apr 01, 2010 at 09:07:18 AM EST
    It would have been transparent and something to measure the cartel against.

    It would have been co-opted (5.00 / 4) (#19)
    by inclusiveheart on Thu Apr 01, 2010 at 10:11:47 AM EST
    like the rest by the insurance companies.

    I think that the only way to get an honest measure that would be a public option would be through the existing Medicare program.

    Anything that this Congress would create from the ground up would be tainted by private insurance's influence - if not out right direction.


    Or they could have just set up the program. (none / 0) (#4)
    by masslib on Thu Apr 01, 2010 at 08:51:32 AM EST
    Because everyone knows in reality the private industry can not compete with the federal government, certainly not for the vast majority of Americans.  Let's remember, as it stands now the private insurers only have 35% of the market.  It's the feds who pay nearly half of all medical bills.

    The Jedi move I'd like to see (5.00 / 1) (#7)
    by andgarden on Thu Apr 01, 2010 at 09:01:43 AM EST
    is for HHS to interpret the "national co-op/non-profit" language as leave to do something public optiony. If they could fit the round peg of Medicare itself into that, it would be quite a coup.

    But with this administration. . .

    Kathleen Sebelius, Jedi knjght? (none / 0) (#25)
    by ruffian on Thu Apr 01, 2010 at 11:16:04 AM EST
    Probably not.

    I told you so (5.00 / 2) (#10)
    by Ga6thDem on Thu Apr 01, 2010 at 09:18:01 AM EST
    Not you BTD because but everybody else who was lauding this as some great bill. I'm sorry about being right but it is what it is and I wish I was wrong. This bill is a disaster waiting to happen and it would have been better to pass nothing. The framework is so poorly set up that it is ripe for massive abuse by the insurance industry.

    Told ya so (5.00 / 1) (#20)
    by waldenpond on Thu Apr 01, 2010 at 10:17:14 AM EST
    When others here kept writing '80-85%, I responded with 'health care AND related expense' which is rather broad.

    I also pointed out that the impact that the segregation of funds (EO) will be determined by HHS.  The Catholic bishops are not done.


    Yep (5.00 / 1) (#22)
    by Ga6thDem on Thu Apr 01, 2010 at 10:23:03 AM EST
    you get the itoldjaso medal too. The reality is that they didn't even need the "related expense" escape hatch. They could have reclassified lots of thing as expenses.

    It's absolutely no surprise to anyone (none / 0) (#32)
    by cawaltz on Thu Apr 01, 2010 at 12:58:48 PM EST
    with half a brain that the insurance companies would exploit the loopholes they helped create when they "worked with" the administration in crafting the bill. It's why alot of us weren't anxious to give them a seat at the table at all in the health care debate. At the very best we were hoping someone in government would promote something that would give us recourse if the companies reneged and worked the loopholes(like a public option).

    And our government (5.00 / 3) (#18)
    by TeresaInSnow2 on Thu Apr 01, 2010 at 10:06:50 AM EST
    --our Democratic Goverment -- is going to force us to buy insurance from these people.  The ONLY recourse we had against them was to walk away and insure ourselves.  Our government is taking that recourse away from us.

    Maybe someday those who criticized us for seeing all that was wrong with this bill will start to understand the real implications of "reform" that they cheerleaded....and the public anger that will ensue from it.

    To me, as you all probably know by now, someone who has spent many years on the individual market, this article isn't even slightly surprising.

    I have a vague recollection that when (5.00 / 2) (#27)
    by Anne on Thu Apr 01, 2010 at 11:51:26 AM EST
    the issue of the medical loss ratios was being batted back and forth, there was discussion of whether the insurance companies would be taking liberties with the definition of "medical," and the consensus was that of course they would.

    And so it goes...

    Why on earth anyone believed even for a nanosecond that the insurance companies were not going to game the system to make sure that for whatever new "regulations" that would require them to cover anyone and everyone and keep even the sick people insured, and would thus eat into their profi, there would be a corresponding move by these companies that would allow them to make it up somewhere else, is beyond me.

    I have a feeling that by the time November rolls around, the expletives uttered with the phrase "health reform" will drown out the angelic sound track of harps and bluebirds in Democratic campaign ads...but they may not drown out the sound of insurance company execs' and lobbyists' laughter at what they were able to put over on us.

    Those execs and lobbyists (5.00 / 3) (#29)
    by jondee on Thu Apr 01, 2010 at 12:13:48 PM EST
    were hired right from the start not for any special insight they might have into "the human use of human beings", but because they were sharks..And they'd, if backed into a corner, be the first ones to tell you that what they've been doing is no different, in essence, than the game everyone is required to play - as the price of admission - to K St and those special breakfast sessions..and to ascend the next rung of that big ladder they all want to climb.

    The problem goes back to the narrow, life-denying paradigms these people - the pols and their corporate paymasters - are still operating out of.  


    Why do you hate Obama? (5.00 / 1) (#39)
    by lambert on Thu Apr 01, 2010 at 01:41:38 PM EST
    Seriously, captured regulators? I'm shocked.

    When you get a minute, I'd be curious to (none / 0) (#42)
    by Anne on Thu Apr 01, 2010 at 01:59:37 PM EST
    know why you rated my comment (#27) so low; do you disagree with it?  Generally, you will counter opinions you find factually wrong or intellectually false, so I admit to wondering why you rated low, and didn't have anything to say.

    Because I missed! (none / 0) (#52)
    by lambert on Fri Apr 02, 2010 at 06:46:23 PM EST

    sorry, typo (5.00 / 1) (#51)
    by Militarytracy on Thu Apr 01, 2010 at 07:56:11 PM EST
    the surgery did NOT take place in my nonprofessional opinion due to the fault of any third party.

    Simple solution...... (none / 0) (#15)
    by NYShooter on Thu Apr 01, 2010 at 10:02:26 AM EST
    The public can't get enough "Reality" T.V.....let's give it to them.

    Every week three camera crews follow three truly heart wrenching, compelling cases of American citizens desperately in need of medical care; a young child battling cancer, grandma writhing in pain after having fallen down the stairs, Uncle Nick, just back from Afghanistan, unable to speak due to excruciating pain caused by wounds that could be mitigated with pain medication, but denied, because "no one ever died from pain."

    It would have to be public television, of course, and Congress would go completely bat-sh1t to de-fund them.....there's always you-tube.

    America has to have it shoved in its face; Wall Street robbing us blind was one thing, watching family members enduring intolerable suffering (unnecessarily) may just cross the bipartisan divide Obama so longs for.

    I just received notification (none / 0) (#50)
    by Militarytracy on Thu Apr 01, 2010 at 07:54:41 PM EST
    today that Joshua's last entire titanium rib surgery that took place in December has been denied payment by Tricare because according to them this surgery could have been due to some third party "accident".  This kid has such a surgery twice a year because of the rods in his back and the fact that he is growing.  Everything is in the doctor's notes.  They constantly did this with all of his xrays and now they will do it with his entire surgery.  Humana already has a special rate and only pays about a quarter of what this surgeries original charge is.  The provider has waited four months for payment and has not received anything.  The payment won't even begin to be processed to them until I fill out these stupid forms saying that in my nonprofessional motherly opinion, this surgery did take place due to any illness or accident that he suffered at someone else's hands.  This is ridiculous, and is what is breaking providers and destroying our healthcare system!  This was his eleventh such surgery, but the first time they ever did this.