NAIC submits final medical loss ratio recommendations to HHS
After months of often contentious debate between state insurance regulators, the federal government and the insurance industry, the National Association of Insurance Commissioners has submitted its recommendations on medical loss ratios to Health and Human Services Secretary Kathleen Sebelius.
"We thank the NAIC for the recommendations, which the commissioners finalized today (Thursday) on how best to implement the medical loss ratio policy, which will ensure consumers get the best value for their healthcare," Sebelius said in a statement. "These recommendations are reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers. Not only do they ensure consumers receive better value for their healthcare dollar, they recognize special circumstances in different markets to preserve market stability and employee coverage as we transition to the new marketplace in 2014."
The Patient Protection and Affordable Care Act, passed in March, requires small group insurers to spend at least 80 percent of the money generated from premiums on healthcare costs. Large group insurers must spend 85 percent of premiums.
For more than seven months the commissioners and the industry grappled with what expenses should constitute medical expenses, with the insurance industry pressing to include claims processing and call centers – items that ultimately where not included. The insurance industry did win a few of the battles along the way, notably a provision in the recommendations that allow health plans to deduct both federal and sate income taxes in their MLR calculations.
Still, the insurance industry opposes many of the provisions. Karen Ignagni, president and CEO of America's Health Insurance Plans, issued a brief statement: "The current MLR proposal will reduce competition, disrupt coverage and threaten patients' access to health plans' quality improvement services."
In an Oct. 13 letter to NAIC in anticipation of the final MLR recommendations, Ignagni expressed concern about several provisions, including the decision not to allow money spent on fraud prevention efforts and ICD-10 implementation as medical expenses.
"Private health plans devote significant resources to anti-fraud programs, using a variety of tools to prevent, detect and remedy fraudulent and abusive conduct, often in partnership with government agencies," she said. "These programs help to improve quality for the American people by identifying healthcare providers who are delivering care with false credentials, intentionally performing medically unnecessary procedures (e.g., surgeries) or falsifying medical records."
With MLR requirements set to go into effect Jan. 1, 2011, the NAIC has its own concerns about implementation.
"We are concerned that a loss ratio of 80 percent in the individual market may not be readily achievable by many insurers," the commissioners wrote. "These companies have already entered into contracts with agents and brokers that obligate them to pay specified levels of commissions and have expenses associated with underwriting and marketing that they will not be able to reduce until guaranteed issue requirements and health insurance exchanges are implemented."
The letter further said a lack of a transition period in some states could lead to insurer insolvency, which would "destablize" insurance markets. Under these conditions, the NAIC urged Sebelius to consider adjusting the MLR downward to help in the transition period.
