Insurers at Odds With Lawmakers Over Rules on Medical-Loss Ratios
On Thursday, health insurance industry officials expressed disappointment over a recent letter to HHS from six Democratic leaders seeking to clarify how federal taxes and fees paid by health insurers count under medical-loss ratio rules in the federal health reform law, CQ HealthBeat reports.
The officials said the lawmakers' attempt to modify the MLR language in the health reform law could harm millions of consumers (Reichard, CQ HealthBeat, 8/12).
The health reform law stipulated that beginning Jan. 1, 2011, large group health plans must spend at least 85% of premiums on medical services and quality improvement, rather than on administrative costs or profits. The MLR for individual and small-group health plans must be at least 80%.
The letter, which was signed by the Democratic leaders of six influential House and Senate committees, was intended to clarify questions about a provision in the reform law that states that "federal and state taxes and licensing fees" should be excluded from the premium revenue number.
The language essentially means that insurers would have been allowed to count such expenses as medical costs.
The Democrats noted that in drafting the overhaul bill, only federal taxes and fees relating specifically to revenue generated from the insurance coverage provision in the reform law should be counted as medical costs.
Those taxes include the annual fee on market share, the annual fee on each health policy and the tax on high-cost employer plans, the lawmakers said, adding that other taxes -- such as income or payroll taxes -- would not be considered medical costs (California Healthline, 8/12).
The revision has insurers "alarmed, surprised, off balance, and extremely concerned about the financial impact," according to a managed care industry consultant who requested anonymity.
The consultant added that it is "very likely that many plans won't be able to meet the 80% and 85% standard."
Mike Tuffin -- executive vice president of America's Health Insurance Plans -- said the statute in the reform law clearly states that federal taxes are exempt from the MLR.
Tuffin added that changing the statute after the law's enactment would cause coverage disruptions for families and small businesses. According to Tuffin, these disruptions include "changes in benefits, changes in cost sharing or if a plan is unable to meet this new requirement they may not be able to offer a particular product in a particular market."
Legal Challenge an Option, but Timeline Unclear
The managed care industry consultant said that there is not much push for launching a legal challenge to block the lawmakers' new interpretation of the MLR rule when it is issued and implemented by HHS later this year, but it is one of the remaining options.
The consultant added that the industry anticipates receiving a legal opinion on Friday and is meeting with officials attending the National Association of Insurance Commissioners' annual summer conference this week and next week (CQ HealthBeat, 8/12).
A special NAIC working group is developing draft language of the MLR rules and reporting requirements, which it is expected to finalize at the conference (California Healthline, 8/12).
Tuffin declined to comment on possible litigation (CQ HealthBeat, 8/12).
Obama To Address NAIC Conference
On Thursday, the White House announced that President Obama plans to speak about the implementation of the health reform law on Tuesday at the NAIC conference.
The appearance is part of a trip to Washington state that includes campaign events for the state's Democratic senator (Haberkorn/Kliff, "Pulse," Politico, 8/13).