WASHINGTON, D.C. — U.S. Senator John Thune (R-SD), Ranking Member of the Senate Committee on Commerce, Science, and Transportation, delivered the following prepared remarks at today’s “Delivering Better Health Care Value to Consumers: The First Three Years of the Medical Loss Ratio” hearing:

I would like to thank you, Mr. Chairman, for holding this hearing, and our witnesses for being here today.  

As we begin today’s hearing on one small aspect of the Affordable Care Act, I would like to underscore a quote from a constituent of mine, Dale, who wrote to me saying, “I feel the federal government has stolen over $5,000 [per year] from me.” Dale is referring to his significant premium increase, as well as a jump in his deductible, under ObamaCare. 

Another constituent from South Dakota, Roxanne, received a quote of $400 more per month or $4,800 more per year under ObamaCare than her current health insurance plan. With two kids still to get through college, Roxanne and her husband can’t afford a total monthly health insurance payment that is more than their monthly mortgage payment. She wrote to me and said, and I quote, “Please do something about this, there has to be a better way.” 

These are just a couple of the continued frustrations that I hear about from South Dakotans when it comes to the negative impacts of the Affordable Care Act, otherwise known as ObamaCare. Thankfully, Dale and Roxanne believe in a representative democracy, where flawed laws can be changed or repealed. So they, along with many others, have shared their stories about the damaging impacts of this law.

The idea of the Medical Loss Ratio (MLR) provision in the Affordable Care Act, championed by the Chairman, requires insurers to spend the majority of premium dollars on efforts to improve health care quality and places a cap on administrative costs.  

Consumers can benefit under this provision by gaining greater transparency as to how insurers spend premium dollars and, in some cases, getting a rebate from insurers that miss the MLR target. In 2012, the average rebate per family in South Dakota was $70, for the approximately 700 individuals who received a rebate – or just over $5 per month. This is also roughly the same amount as the previous year’s average rebate in my home state.

While other states may have seen higher rebates than South Dakota, it is important to keep this issue in perspective. Approximately $500 million in MLR rebates were paid out nationwide in 2012, a figure that is likely to decline for 2013. At the same time, recent news accounts show that nearly the same amount was squandered on the failed health exchanges in just four states, and hundreds of millions have been wasted on contractors who have been paid to sit idle in ObamaCare processing centers. It's hard to see this as a net gain for consumers and taxpayers.

I appreciate the chairman’s dedication to protecting consumers, and the MLR provision is well-intentioned. We all want quality health care and affordable insurance premiums, but I worry that the MLR provision and the health care law as a whole are having a host of negative consequences on insured individuals and the many Americans who are frustrated that promises about how the legislation was going to work have proven to be untrue.

The intent of the MLR is to help contain spending on health insurance, which is a laudable goal, but some experts believe that the MLR could actually raise the cost of premiums and narrow the competition in the marketplace. 

I am also very concerned that the MLR regulation put forth by HHS can undermine efforts by insurers to prevent fraud and abuse, including efforts to prevent the delivery of inappropriate or unnecessary services that may harm consumers.  

The MLR regulation allows after-the-fact recoveries of fraudulently paid claims to be counted as medical claims, but does not give similar consideration regarding efforts to prevent or deter fraud before it occurs. Yet, prevention efforts arguably have an even more direct impact on the quality of care for patients. For example, in 2012, a doctor pleaded guilty to health care fraud for allegedly providing fewer chemotherapy drugs than the prescribed dosage to her patients. The judge in the case was appalled at how this doctor had treated vulnerable patients, yet the doctor was operating a clinic for five years before her arrest for fraud. Ironically, because of the significance of health care fraud, the government itself is in the process of trying to move beyond the traditional “pay and chase” approach to fraud, instead working to prevent fraud before it occurs. Health insurers should be incentivized to do the same.

Other concerns that have been raised with the MLR include higher administrative costs due to regulatory compliance requirements; states not receiving needed waivers, as one size doesn’t fit all; discouraging investments that could improve health care quality and reduce costs; and reducing access to agents and brokers who can help consumers to navigate the complex health care system. And, because the standards for the MLR program are left up to HHS, the provision effectively leaves the design of health care activities up to the government, rather than leaving the decision and choice to the consumer and state insurance regulators. 

Even if the MLR could be implemented without negative consequences, we cannot ignore the law’s larger negative impact. How do consumers benefit when the costs of other ObamaCare provisions exceed any potential benefits from the MLR? As just one example, according to a summation compiled by the House Ways and Means Committee regarding estimates from the nonpartisan Joint Committee on Taxation and the Congressional Budget Office, tax increases from ObamaCare are estimated to total $1 trillion over 10 years. Some of those costs will be passed on directly to consumers, including my constituents in South Dakota and many other Americans.

Taken as a whole, ObamaCare continues to wreak havoc on our economy and on job creation. More and more Americans are losing their existing health care, and as a result of the employer mandate, businesses are cutting hours to reduce the number of full-time employees on their books. Ultimately, the Congressional Budget Office estimates that, due to the decline in hours worked, ObamaCare will result in losses equal to 2.5 million fewer full-time workers.  

I want to reiterate what Roxanne wrote to me – “there has to be a better way.” Consumers should get appropriate value for their premium dollars on health insurance – and the MLR was a well-intended attempt at achieving that – but when one steps back to look at the larger picture, it’s increasingly evident that the many problematic costs and regulations associated with the health care law will almost certainly frustrate that purpose.

Thank you again Mr. Chairman for holding this hearing, and I look forward to the testimony from our witnesses.

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