Maryland Insurance Commissioner Therese M. Goldsmith announces the departure of Deputy Commissioner Beth Sammis.



New rules leading to lower healthcare premiums, cuts to agents’ fees

GAO: New rules leading to lower healthcare premiums, cuts to agents’ fees

By Sam Baker – 08/29/11 03:24 PM ET

A controversial piece of the healthcare reform law is beginning to save consumers money but could also give them fewer plans to choose from, the Government Accountability Office (GAO) said Monday.

The GAO interviewed insurance companies and regulators about the early impact of a provision that governs how insurance companies spend their money. It requires plans to spend 80 or 85 percent of their premiums on medical costs — a calculation known as the medical loss ratio (MLR). Companies that miss the minimum MLR will have to pay rebates to their customers.

According to GAO, some insurers are decreasing premiums or leaving their rates unchanged in order to comply with the MLR requirements. Three companies told GAO that premiums will either fall next year or increase by a smaller amount than they would have without the MLR.

The changes to premiums are coming in conjunction with cuts to brokers’ premiums, GAO found. Insurance agents and brokers have warned repeatedly that the MLR will hurt them. And while consumer advocates have argued that the effects are overstated, the GAO report seems to support agents’ claims.

Commissions to agents and brokers fall into the 15 or 20 percent of revenues that insurance companies can use for administrative expenses and profit. Brokers are worried that insurance companies will cut commissions and redirect that money toward their own bottom lines.

The GAO said "almost all" of the insurers it interviewed are cutting commissions. Those cuts enabled the plans to change their premiums.

The report also indicates that one of the most protracted policy debates over the MLR isn’t making much of a difference so far.

As the rules for the MLR were being crafted, insurers complained repeatedly about the treatment of initiatives to improve healthcare quality. Those programs are exempt from the calculation of administrative expenses, but plans said the exemption is too narrow. They said the rules shouldn’t specify which activities can be counted as quality improvement and that such an approach could discourage investments in new programs.

But insurers told GAO that their loss ratios will barely change because of the deduction for quality improvement. Subtracting those initiatives might shave about 0.5 percent off of total administrative expenses, one company said.


GAO Report — Private Health Insurance & Early Experiences Implementing New Medical Loss Ratio Requirements

Private Health Insurance: Early Experiences Implementing New Medical Loss Ratio Requirements


To help ensure that Americans receive value for their premium dollars, the Patient Protection and Affordable Care Act (PPACA) established minimum "medical loss ratio" (MLR) standards for health insurers. The MLR is a basic financial indicator, traditionally referring to the percentage of premiums spent on medical claims. The PPACA MLR is defined differently from the traditional MLR. Beginning in 2011, insurers must meet minimum MLR requirements or pay rebates to enrollees. While insurers’ first set of data subject to the MLR requirements will be for 2011, and is not due until June 2012, insurers prepared preliminary PPACA MLR data for 2010. GAO examined: (1) what can be learned from the traditional MLR data reported by health insurers prior to PPACA; (2) what factors might affect the MLRs that insurers will report under PPACA; and (3) what changes in business practices, if any, have insurers made or planned to make in response to the PPACA MLR requirements. GAO analyzed premiums, claims, and traditional MLR data for nearly all insurers for 2006- 2009 and interviewed a judgmental sample of seven insurers–selected to provide a range based on their size, profit status, and the number of states in which they operated–about their experiences using the PPACA MLR definition.

From 2006 through 2009, traditional MLRs on average generally exceeded PPACA MLR standards. This is even without the additional components in the new PPACA MLR that will generally increase MLRs. However, traditional MLRs also varied among insurers. Traditional MLRs within the individual market varied more than those within the small and large group markets, and a larger proportion of individual market insurers generally had lower MLRs. Additionally, traditional MLRs varied more among smaller insurers than among larger insurers in all three markets. Some components of the PPACA MLR requirements may mitigate the implications of some of these variations. The insurers GAO interviewed said their PPACA MLRs will be affected by changes in the MLR formula and their ability to provide more precise data in 2011 and beyond. Most of these insurers reported that the deduction of taxes and fees in the PPACA MLR formula would contribute to the largest change in their 2010 MLRs. Including expenses for activities to improve health care quality was also cited as a factor affecting insurers’ MLRs but to a lesser extent. In addition, because insurers had limited time to respond to HHS’s interim final rule on PPACA MLRs, which was published in late 2010, they said that their 2010 MLRs were based in part on best estimates. Insurers said they expect their ability to provide more precise PPACA MLR data will improve in 2011 and beyond. Most of the insurers GAO interviewed were reducing brokers’ commissions and making adjustments to premiums, as well as making changes to other business practices, in response to the PPACA MLR requirements. Almost all of the insurers said they had decreased or planned to decrease commissions to brokers in an effort to increase their MLRs. Insurers varied on how the PPACA MLR requirements might affect their decisions to implement activities to improve health care quality. While one insurer said that their decision to implement new activities would be affected by whether or not an activity could be included as a quality improvement activity in the PPACA MLR formula, other insurers said that the PPACA MLR requirements are not a factor in such decisions. Insurers also differed on how the PPACA MLR requirement may affect where they do business. One insurer said that they have considered exiting the individual market in some states in which they did not expect to meet the PPACA MLR requirements, while several other insurers said that the PPACA MLR requirements will not affect where they do business. In commenting on a draft of this report, the Department of Health and Human Services (HHS) said that the MLR provision will increase transparency in the insurance market and value for consumers’ premiums.

Kevin Wrege, Esq.

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016

GAO Early Experiences Implementing MLR July2011.pdf

DISB News: Health Insurance Exchange Online Survey Extended

For Immediate Release:

August 30, 2011

Contacts: Michelle Phipps-Evans (DISB) 202.442.7822; michelle.phipps-evans

Dorinda White (DHCF) (202) 442-8992; dorinda.white

Health Insurance Exchange Online Survey Extended

Washington, DC (Aug. 30, 2011)— In trying to reach as many District residents as it can, the Mayor’s Health Reform Implementation Committee (HRIC) has decided to extend its online survey seeking public input on planning for a Health Insurance Exchange (HIX) for District residents. The HIX, which is similar to a virtual marketplace, is required by the federal health care reform law, the Affordable Care Act (ACA), and will serve a critical function in helping District residents secure more options for health care coverage with vastly improved consumer protections in place.

The Brendan.Rose or at (202) 442-7811.

The HRIC member agencies—the District departments of Health Care Finance; Insurance, Securities and Banking; and Health—have been hosting several public meetings to garner public input in the planning process. However, since many people find it difficult to attend public meetings, the HRIC has developed a survey to offer another avenue for sharing thoughts and suggestions. This is the first of several surveys that will be conducted during the planning phase for the HIX.

The next One City Insured Meeting will be this Wednesday, August 31, from 6:30 pm to 8:30 pm in Ward 8 at the Thurgood Marshall Academy Public Charter High School at 2427 Martin Luther King Jr. Avenue, SE. It will be cohosted by Ward 8 Councilmember Marion Barry.

All are invited to find out when the next One City Insured Meeting will be in your ward on the HRIC website at


“One City Summer Fun … Something for Everyone”
Mayor Gray’s comprehensive summer program with fun activities, events and services for residents of all ages
For more information visit or call 311

Draft Copy of DC Council Report on Mayoral Hiring Abuses

D.C. Council committee faults Gray, aides for hiring problems

By Tim Craig and Mike DeBonis, Tuesday, August 23, 8:54 AM

D.C. Mayor Vincent C. Gray’s administration violated local and federal law, showed little regard for government money and damaged the city’s reputation through “nepotism and cronyism,” a D.C. Council panel concludes in a draft report expected to be made public Tuesday.

The special committee did not uncover direct involvement by Gray in his administration’s most controversial personnel decisions, but it sharply criticizes the conduct of several of his most trusted deputies and raises concerns about the mayor’s focus during the early days of his administration.

“Ultimately, Mayor Gray, as chief executive, is responsible for the actions and errors of his campaign, transition and administration,” the report states. “And when those actions and errors were discovered, it is unfortunate that the Gray administration did not act more swiftly to investigate and repudiate the unlawful actions that occurred.”

The 47-page report, a copy of which was obtained by The Washington Post, states that Gray appeared “essentially disconnected” and that he failed to adequately supervise his staff. The report blames three top aides: Judy Banks, the former interim head of the D.C. Department of Human Resources; Gerri Mason Hall, Gray’s former chief of staff; and Lorraine Green, the chairwoman of the mayor’s campaign and the transition.

“These individuals abused their authority and the mayor’s trust,” the report states. “It appears this trio acted with little supervision from Mayor Gray.”

The report added that the “damage created by these errors is not irreparable, but it will take time for the District to heal from them.”

The Post is seeking comment from Gray, Green, Banks and Hall as well as others cited in the report, which follows a six-month investigation by the council into how Gray (D) selected members of his administration and set their salaries.

The probe also explored allegations by former mayoral candidate Sulaimon Brown that he was promised a city job and paid by Gray advisers, including campaign consultant Howard Brooks, in exchange for attacking then-Mayor Adrian M. Fenty (D) last year on the campaign trail.

The report, which was spearheaded by Council members Mary M. Cheh (D-Ward 3) and David A. Catania (I-At-Large), represents the first official assessment of Brown’s claims. Federal prosecutors and a congressional committee are also investigating.

While the report says Brown’s testimony was “undercut by . . . his tendency to exaggerate, seek the limelight, and embellish his story for dramatic effect,” as well as his “erratic behavior,” it concludes that Brown received at least $1,160 in payments from Brooks. The committee also found evidence of a job promise in the “extraordinary actions” that Hall and Green undertook to find Brown a city position. But the committee, which is scheduled to vote Wednesday to finalize the draft report, did not directly link Gray to the payments.

Brown was hired as a special assistant at the Department of Health Care Finance, even though senior administration officials were aware he had a “poor” credit history. In February, after Brown’s hiring — and his record of arrests — came to light, he was fired.

The committee’s report found that Brown’s $110,000 salary was “beyond what could legitimately be deemed reasonable.” Gray had initially suggested that Brown was qualified for the special assistant job, citing a resume showing that Brown had experience in auditing and accounting. But the report said there was no attempt to verify Brown’s resume claims, which in many cases were exaggerated.

The report does not disclose any information about the status of the grand jury investigation underway in connection with Brown’s allegations. But the committee recommends that the U.S. attorney’s office investigate Brown and Banks for their conduct during the council investigation. The report indicates that Banks may have committed perjury in her testimony before the committee and that Brown may have made “false statements” to the council.

The most extensive section of the report — based on 20,000 pages of documents including bank records and 12,000 e-mails — and on 25 hours of public hearings, centers on allegations of nepotism.

The committee found that five adult children of senior Gray advisers were put on the payroll shortly after the mayor’s inauguration in January, including two hires that were “improper and likely illegal.”

Although the District does not have a nepotism policy, the committee noted that the city government is subject to federal nepotism restrictions.

In what the committee calls “the clearest evidence of illegal nepotism,” the administration hired Hall’s son to a $55,000-a-year position in the Department of Parks and Recreation.

According to the committee, Hall e-mailed her son’s resume to Banks at 8:54 a.m. on Jan. 14. Twenty minutes later, according to the report, “Ms. Banks instructed her staff to process Mr. Hall’s paper work for his position at the Department of Parks and Recreation.”

The committee also believes it may have been illegal for the son of Rochelle Webb, who had been named the head of the Department of Employment Services, to be given a job in the Fire and Emergency Medical Services Department.

In another hire, the committee also questioned why Peyton Brooks, the son of campaign consultant Howard Brooks, was given a job.

Although it determined that Brooks hire did not violate nepotism laws because Brooks was not a city employee, the committee said the hire “violated several standard personnel procedures.”

“Peyton Brooks stated that he was never interviewed by anyone in the District government before he was hired and never received a job description for his position,” the report states.

Both Hall and Webb have left city government, as have their two sons. Peyton Brooks has also stepped down from his position.

The report also faults the Gray administration for ignoring limits on executive pay and bonuses. Despite a District law capping executive branch salaries, Gray advisers approved numerous salaries that exceeded the cap. The report called it “a cavalier attitude . . .. during a period of fiscal constraint” that “caused residents to lose confidence in their government and public officials.”

But the council committee’s concern about spending on salaries also stretched back to Fenty.

In “one of his final acts as mayor,” Fenty approved a $65,750 bonus for Allen Y. Lew, then the director of the Office of Public Education Facilities and Modernization. Lew was earning $275,000 a year. According to the council report, Fenty approved the payout even though the council had banned performance bonuses that year due to budget constraints.

Gray, who named Lew city administrator weeks before the bonus was issued, allowed the payment to proceed in early February.

Kevin Wrege, Esq.

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016

Final Draft Council Report on Gray Hiring Practices 8.23.11.pdf

WSJ: States Feel Economic Heat as Market Drops

As Investors Get Bit, States Feel Pain


State-budget officials from around the U.S. were huddled in Utah earlier this month for an annual meeting when someone glanced at a BlackBerry and announced that the Dow Jones Industrial Average had fallen 500 points.

"It was one of the worst moments of the week," said Scott Pattison, executive director of the National Association of State Budget Officers.

The volatile stock market highlighted a growing problem for budget planners. In recent decades, states from California to New York have become increasingly reliant on taxes generated from their residents’ investment income. Now, they have found themselves more vulnerable than ever to the market’s gyrations—with serious consequences for state-funded schools, courthouses and other institutions.

Max Whittaker/Prime for The Wall Street Journal

Steven Ladd, a schools superintendent in Sacramento, Calif., has been watching stock-market updates that could hint at state budget prospects.

Overall, personal income taxes made up 36% of states’ revenue in 2008, up from 26% in 1978, according to the Nelson A. Rockefeller Institute of Government in Albany, NY. With middle-class wages stagnating, much of that increase has come from wealthy people whose taxes fluctuate with the stock market. These high-income individuals pay taxes on capital gains they realize through selling shares, income they earn from stock options and bonuses tied to the stock market.

"The market itself is volatile, and the choice by taxpayers of whether to realize capital gains depends on a host of personal factors," said Donald Boyd, a senior fellow at the Rockefeller Institute and an expert on budget volatility. "It makes it extremely hard to predict."

During a government revenue crisis of 1990-1992, 25% of state revenue forecasts fell short by 5% or more, according to the Pew Center on the States and the Rockefeller Institute. In 2009, 70% of such forecasts fell short.

Now, budget watchers warn that some states may have missed the mark again. After deep revenue declines in the 2009 and 2010 fiscal years, followed by a flat 2011, states had finally expected modest revenue growth this fiscal year, according to the National Conference of State Legislatures.

That had partly to do with the strength of the stock market earlier this year. On July 1, when most states began their fiscal year, the Dow was up 8.7% for the year. As of Friday, the average was down 6.6% for 2011.

"When people filed their tax returns in April, states saw a big bump in revenue, and some people looked at that and mistakenly concluded that happy days are here again," Mr. Boyd said. "But it’s not true."

California is among the states most dependent on the wealthy and their investments, along with such states as New York, New Jersey, Connecticut and Massachusetts, according to the Rockefeller Institute.

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In California, the top fifth of taxpayers accounted for 89% of personal state income tax revenue in 2007, up from 81% in 1993, as wealthy Californians profited from the dot-com and real-estate booms, according to state data. The contributions from all other income groups declined in that period.

Then came the recession, which sent the contribution of the top fifth of taxpayers slipping to 85% in 2009. That helped lead to a crippling budget crisis for the state, which resorted to IOUs to pay its bills that year.

As the state’s economy continued to suffer, state forecasters were puzzled this May when they saw that income-tax collections for 2010 had come in much higher than economic data had led them to predict.

That bolstered their confidence that a recovery was under way. That belief, along with pressure to close an enormous budget gap without added taxes, persuaded Gov. Jerry Brown to boost his earlier revenue assumption by $8.4 billion by the time he signed the budget for the fiscal year starting July 1. That increase denotes the apples-to-apples rise after adjusting for other changes to the budget, said a finance-department official.

A key source of the hoped-for boost: a rise in wages and capital gains for wealthy Californians, according to the finance-department official. That means the market downturn of recent weeks will "tend to make additional revenue less likely," the official said, "but we don’t know what’s going to happen in the coming weeks and months."

The California Department of Finance will update its forecast in December. If it seems then that revenue will fall short of expectations, the budget calls for up to $2.5 billion in midyear cuts to schools, higher education, public safety and other areas depending on the size of the shortfall. That’s on top of $15 billion in cuts and other spending-reduction maneuvers already approved this year.

The finance-department official declined to predict where the state’s revenue might end up. Chris Thornberg, founding partner at analysis-firm Beacon Economics, said he expected the market downturn to translate to a $1.3 billion to $1.5 billion reduction in revenue for the state, assuming markets recover slightly by year’s end. That would be enough to trigger some additional cuts.

H.D. Palmer, a spokesman for the state finance department, called Mr. Thornberg’s prediction "a sheer guesstimate" because it comes so early in the fiscal year. He added, "The only thing we’ve learned since late June is that you should keep a bottle of Dramamine at your desk."

Nonetheless, at Elk Grove Unified School District in Sacramento, Superintendent Steven Ladd has been following stock-market updates that could hint at the state budget’s prospects—which will in turn determine whether he has to make midyear cuts of his own.

"I have to live with the recognition that the volatility in the markets is beyond my control," he said.

Write to Vauhini Vara at vauhini.vara

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

Kevin Wrege, Esq.

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016

WSJ: Likely Timing of Health Reform Lawsuit

Election Looms in Health-Law Review


The Supreme Court is likely to decide by January whether a ruling on the constitutionality of the Obama administration’s health law will come before or after the November 2012 election.

A federal appeals court in Atlanta struck down last week the law’s requirement for most Americans to carry health insurance. It conflicted with another appellate ruling upholding the law, and makes it a virtual certainty the Supreme Court will step in to resolve the dispute.

What isn’t certain is whether a high court decision would come before the end of its 2011-12 term next June. If the justices agree by January to hear an appeal, arguments likely will occur in March or April, with a decision before July.

Under normal practice, any case accepted after January gets kicked into the next term. That would mean the resolution would come after voters decide whether President Barack Obama, the health-care overhaul’s champion, deserves a second term.

Bradley Joondeph, a Santa Clara University law professor, said an early decision on the Patient Protection and Affordable Care Act, derided by opponents as "ObamaCare," could benefit Republicans. "If the court upholds the law, the Republican base gets energized four months before the election," he said. "If it gets struck down, well, there go the guts of the centerpiece of Obama’s domestic agenda."

The timing is also important to state governments and companies, which want to know whether they should go ahead planning for the law’s central provisions to take effect in 2014.

While some conservatives have called on the court to fast-track the case, Supreme Court justices prefer not to be seen as political actors, and are unlikely to deviate from their normal procedures in order to time a decision before or after an election.

In addition, two appellate courts have yet to issue rulings on challenges to the health law. One of those challenges, at the U.S. Court of Appeals for the District of Columbia Circuit, is still awaiting arguments, set for Sept. 23, and the timing of its decision is uncertain.

Some parties to the case say the high court needn’t wait because the issues have already been thoroughly reviewed by lower courts. Several federal judges have written lengthy rulings saying the health law’s insurance mandate properly draws on Congress’s power to regulate interstate commerce. Other judges have said Congress overstepped its bounds.

Earlier this year, the justices turned down a request for expedited review from Virginia Attorney General Ken Cuccinelli, who brought one of the challenges now pending in an appellate court.

In June, the Cincinnati-based U.S. Court of Appeals for the Sixth Circuit upheld the law by a 2-1 vote. The loser in the Sixth Circuit case, the Thomas More Law Center, a conservative advocacy group in Ann Arbor, Mich., already has filed a petition asking for Supreme Court review.

One factor that could sway the timing is the legal strategy of the Obama administration, which lost Friday’s 2-1 ruling by a panel of judges at the 11th U.S. Circuit Court of Appeals in Atlanta. The administration has until Sept. 26 to ask the full 11th Circuit to review the case, or it could appeal directly to the Supreme Court.

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Republican candidate Herman Cain, speaking in Iowa last week, is pressing for quick action on a Supreme Court review.

Republican presidential candidate Herman Cain tweeted Tuesday, "We must keep pressure on Dept. of Justice not to delay the hearing of Obamacare case in Supreme Court! It cannot wait til 2012!"

Tom Goldstein, a lawyer who frequently argues before the Supreme Court and publishes the website, said he believes the government will seek the full 11th Circuit review. "They will not want to allow this panel opinion to stand," he said, because of the "momentum" against the insurance mandate generated by the 207-page ruling.

Supreme Court justices are likely to take particular interest in the 11th Circuit case, filed by 26 mostly Republican state attorneys general and governors who are represented by Paul Clement, solicitor general in the Bush administration. While that panel found the insurance mandate unconstitutional, it unanimously upheld other provisions of the law expanding Medicare coverage for lower-income Americans.

—Ashby Jones contributed to this article.

Write to Jess Bravin at jess.bravin

Copyright 2011 Dow Jones & Company, Inc. All Rights Reserved

Kevin Wrege, Esq.

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016