Politico reports today on how Health and Human Services Secretary Kathleen Sebelius has a tightrope to walk on her decision over medical loss ratios, a key consumer-driven component of health reform. Insurers must spend 80 percent of their premium dollars in the small group market -- and 85 percent in the large group market -- on medical care as opposed to salaries and administrative expenses.

The health reform law gave the authority for recommending how the ratio should be defined to the National Association of Insurance Commissioners, while the final certification authority rests with Sebelius. As Politico reports, the insurance commissioners may not develop the completely consumer-friendly definition that many Democratic members of Congress are pushing for. For example, Democratic lawmakers want federal taxes counted in the ratio in a way that makes it more difficult for insurers to meet the requirement -- insurers want the opposite. Politico reports that the NAIC has signaled it will favor the insurers' view.

So, does Sebelius rule against the NAIC in favor of the consumer-driven emphasis of health reform? Or does she accept the recommendations made by the body of experts to whom this authority was delegated? While health reform is largely about consumers, it maintains the private health insurance market as the predominant provider of coverage. For this reason, the administration has to at least acknowledge the arguments made by insurers who are concerned that overly zealous regulations may force them to pull out of some markets, causing harm to health reform's goals in their own right.

Sebelius' pickle is just one example in which implementing the new health law requires a difficult balancing act between the consumer protection ideals at the center of reform and the needs of an insurance industry whose actions helped precipitate reform.

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