Insurance Commissioner Group Approves Rules on Health Care Expenditures
On Thursday, the National Association of Insurance Commissioners unanimously approved its recommendations for the medical-loss ratio provision under the federal health reform law, CQ Today reports.
NAIC will submit the proposal to HHS next week for final review and implementation by Jan. 1, 2011 (Reichard, CQ Today, 10/21).
Under the overhaul, large health plans beginning on Jan. 1 will be required to spend at least 85% of premiums on medical services and quality improvement, rather than on administrative costs or profits. Individual and small-group health plans' MLR must be at least 80%.
The law would require insurers to pay a rebate to customers if their MLRs fall below the new limits (California Healthline, 9/24).
NAICâs recommendations delineate what health insurers can count as medical services or quality improvement.
Details of the Vote
Before the final vote, insurance commissioners overcame an effort by insurers and insurance brokers to attach amendments to the rules. The final recommendations seem to favor consumers rather than the insurance industry, according to the Washington Post (Aizenman, Washington Post, 10/22).
The finalized rules largely resemble earlier drafts approved by NAIC, The Hill's "Healthwatch" reports.
After the vote, HHS Secretary Kathleen Sebelius said HHS will use NAIC's recommendations to develop the final guidelines "in the coming weeks" (Lillis, "Healthwatch," The Hill, 10/21).
Spending Parameters for MLR Calculations
NAIC clearly identified physician bills as cost items that insurers could count as medical spending (Kliff/Haberkorn, Politico, 10/21).
Other costs NAIC recommended that insurers can count as medical expenses under their MLR calculations include:
- Expenses intended to increase patient safety;
- Investments in health information technology; and
- Preventive measures against medical errors and hospital readmissions.
Meanwhile, NAIC rejected an amendment that would have allowed insurers to aggregate medical spending across states and factor it into their MLR calculations ("Healthwatch," The Hill, 10/21).
Other items that NAIC ruled could not be counted as medical expenses included:
- Nurse hotlines that do not deal directly with patient care;
- Initiatives to address fraud; and
- Insurance brokers' commissions.
The decision to omit brokers' fees from the MLR calculation criteria drew criticism from insurance agents, who in recent weeks have argued that insurance companies might attempt to cut their fees and in turn drive many of them out of business (Washington Post, 10/22). As a result, NAIC approved a proposal to establish a work group that would collaborate with HHS to address the issue (Politico, 10/21).
Taxes and Fees Issue Still Unaddressed
HHS still has to address the types of taxes and fees that insurers could count as medical expenses in their MLR calculation, CongressDaily reports. The issue emerged over the summer between insurers and key lawmakers who developed the overhaul legislation (McCarthy, CongressDaily, 10/21).
NAIC previously dismissed the insurance industry's requests to include federal income taxes on investment income and capital gains as medical costs ("Healthwatch," The Hill, 10/21).
Insurers Seek Transition Period, Warn of Consequences
While consumer advocates and federal health officials and lawmakers hailed the recommendations, insurers said the rules would hinder the goals of the reform law to improve access to and the quality of care, CQ Today reports.
America's Health Insurance Plans President Karen Ignagni said the recommendations "will create unintended consequences," as they will "reduce competition, disrupt coverage and threaten patients' access to health plans' quality improvement services." AHIP has lobbied for a transition period to give insurers more time to adjust to the MLR rules (CQ Today, 10/21).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.