Legal Opinion Questions Power of Medical-Loss Ratio Rule Clarification
On Friday, America's Health Insurance Plans released a legal opinion that recommends that a letter by six congressional Democrats seeking to clarify how federal taxes count toward medical-loss ratio rules should not be considered as an explanation of the legislative intent of Congress, CQ HealthBeat reports (Reichard, CQ HealthBeat, 8/13).
Under the health reform law, large group health plans beginning Jan. 1, 2011, 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 requiring "federal and state taxes and licensing fees" to be excluded from the premium revenue number.
The language in the overhaul 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 (California Healthline, 8/13).
According to the legal opinion from Washington, D.C., law firm O'Melveny & Myers, "well-settled principles of statutory construction and longstanding Supreme Court precedent establish that the post-enactment interpretive opinions of several members of Congress cannot alter the meaning of an otherwise unambiguous statutory provision."
As such, the Democrats' letter "should not be given interpretive weight" by any court, HHS or the National Association of Insurance Commissioners, the opinion recommends (CQ HealthBeat, 8/13).
Questions Surface About HHS' Implementation of Rules
On Tuesday, during the final day of the conference, the NAIC working group is expected to release its final MLR rules recommendation that would clarify which services should be considered as direct medical services (Calvan, Sacramento Bee, 8/14).
Attendees at the conference have begun discussing how closely HHS might follow the recommended guidelines (Kliff/Haberkorn, "Pulse," Politico, 8/16).
HHS would need to certify the guidelines before they can be implemented (Sacramento Bee, 8/14).
Democrats Seek Strict Definition of Quality Improvement MLR Rules
Meanwhile, in an Aug. 3 letter to NAIC officials, 65 House and Senate Democrats asked NAIC to establish a strict definition of "quality improvement measures" in the MLR rules, urging officials to refrain from allowing insurance companies to influence the process.
The letter -- which was released by Health Care for America Now and sent to HHS Secretary Kathleen Sebelius and state health insurance commissioners -- stated, "We cannot allow insurance companies to cook the books in order to satisfy the bottom line instead of paying for the health and well-being of patients" ("Pulse," Politico, 8/16).
Insurers' Costs Under MLR Rules Likely To Exceed Forecasts, Study Finds
Health insurance companies costs' could exceed earlier projections when the MLR rules and other reforms outlined in the White House's "Patients' Bill of Rights" are implemented in the coming months, according to a recent study by Weiss Ratings, HealthLeaders Media reports.
For the study, researchers reviewed the expense reports of 543 health insurers, which they divided into two groups based on whether they already were complying with the MLR requirements in 2009.
The study found that the group of 317 firms already complying with MLR rules had average net profit margins of just 0.7%, compared with an average net profit margin of 6.3% among the companies that were not yet in compliance.
In addition, the study found that already compliant companies, when they considered income from their insurance underwriting operations and their investments, earned a total of $1.74 billion, or an average of $5.5 million each.
The not-yet-compliant companies earned a total of $7.68 billion, or an average of $34 million each (Simmons, HealthLeaders Media, 8/13).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.