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At the NAIC (National Association of Insurance Commissioners) conference yesterday, regulators approved the medical loss ratio “blank” – the form that will get sent to health insurers to determine how much of their premium revenue gets spent on medical care. And in an unexpected early victory, the NAIC rejected many of the procedures that the insurance industry wanted to include as counting under the MLR.
As part of the Affordable Care Act, insurers must spend 80% of their premiums in the individual and small-group markets on medical care, and 85% of premiums in the large-group market. Regulators will review the blank forms and calculate where the insurers stand in relation to those requirements, and if they fall short, the insurer must rebate the excess profits back to their customers.
About the best way you can determine that the insurance industry didn’t win this round is by reading lead trade group lobbyist Karen Ignagni’s take:
The National Association of Insurance Commissioners “is conducting a transparent and thorough process as it develops the MLR definition, but the current proposal could have the unintended consequence of turning-back-the-clock on efforts to improve patient safety, enhance the quality of care, and fight fraud,” America’s Health Insurance Plans President and CEO Karen Ignagni said in a statement. “Preserving patients’ access to high-quality health care services is essential if the key goals of health care reform are to be achieved.”
Among other things, AHIP wanted fraud prevention to count under the MLR, along with procedural reviews of such techniques as imaging services and wellness incentives in the individual market. Under no definition do these fall under “medical care”; rather, they are cost-cutting measures to reduce expenses. The NAIC did the right thing to reject their inclusion.
The MLR blank form does include other items, like some expenses incurred while detecting and recovering money from fraud, and something entitled “improving health care quality expenses incurred” (nobody seems to yet know what that means). But the insurance industry clearly wanted more, and felt shortchanged. With nearly 1,000 lobbyists at the Seattle meetings, the industry could have done better.
Health Care for America Now, the coalition that worked to pass the health care law, remains in place, and they sounded positively triumphant in their reaction. Executive Director Ethan Rome said in a statement:
“Today the NAIC took a step toward ending the health insurance companies’ stranglehold on our health care. The top state insurance regulators from across the nation voted to put patient care above insurance company profits. This decision moves us closer to more affordable health care for families and businesses and will help ensure that the new health care law fulfills its promise. Advocates have battled every step of the way to hold the insurance companies accountable, and we will continue to do so.
“Many challenges remain before we can declare victory in the MLR fight. Pivotal aspects of the technical rules discussed today in Seattle remain unresolved, including crucial decisions on how to treat federal taxes and agent/broker fees. The NAIC still has work to do, and it should finish its deliberations soon so the Department of Health and Human Services (HHS) can swiftly develop final rules that take effect on schedule for 2011 health plans.”
They may want to dial down the excitement here. As Rome points out, the deliberations have not ended. Among the biggest rules yet to be determined is whether or not insurers can exclude their federal taxes when calculating the MLR. In addition, as Aaron Carroll says, insurers know what they’re doing. They are paid extremely well to get around rules and maximize profits. So this isn’t the end of profitable insurance companies as we know it.
Nevertheless, it’s a pleasant early victory. Most important, HCAN and other consumer advocates didn’t walk away from the fight after Congressional passage. Future strengthening of the health care system will rely on concerted action from the grassroots level on up, including the addition of a public option to make the structure at all sustainable.
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Mornin’
Interesting. know our State energy regulatory agency is pushing back on the second(third?) attempt by our electrical supplier to raise rates another 20% in just 3 years!
They also are challenging Blue Cross’ attempt’s to do the same. I think all the big corporations decided after Obama’s back room deals that the playing fields were wide open. Big PhRMA sure did. My orphan drug for my condition DOUBLED after HCR.
Somehow, the corporations are going to have to realize that if they want to do business in America in this depression, they can’t just rob people, because there’s really nothing left to steal!
And nobody can buy it.
Even Walmart is seeing the trend
Is the NAIC trying to save the insurers from themselves? The insurers seem to think that they are insulated from the rest of the economy.
Interesting. What is often lost in the posts on this and many other progressive forums is just how difficult it is to gain a foothold for anything that will benefit the ordinary citizen if it even comes within a mile of costing some big corporation a nickel. Hence all the lobbyists. So the Obama administration’s accomplishments, when taken in context of basically walking in a political minefield, are huge and he and his team don’t get the credit they ought to. We liberals need a better voice for our ideas and accomplishments.
David Dayen has a fresher cross-post ready: School Districts May Not Spend Teacher Funding Money Until Later
You are forced by law to buy their product, doesn’t get more insulated then that.
My particular soapbox relative to this: when did we decide that taxes aren’t a part of the cost of doing business? I’m fucking sick and tired of every tax levied on corporations being a phantom, as the immediately pass that tax onto the consumer.
The NAIC has no legal authority, so we may want to postpone the party.
They recommend to the states and then the states decide.
The recommendations being developed are pro-consumer ONLY because the NAIC is looking over its shoulder to the likely Federal rules if they do not regulate reasonably.
Ultimately the forms are filled out by accountants (the actuaries once did this but in many states they dropped that idea because the actuaries are bound by “ethics rules for an implied client of the public” that do not seem to affect the accounting and legal profession who see their client as the one cutting the check (not that actuaries don’t cut the client slack – a lot of slack – it is just harder to really go off the deep end).
The accountants claim they follow FASB’s GAAP rules – but all that means is that sales expense for amortization under GAAP might, but not always, exclude the phones in the landscaping department. Wellpoint has already gotten accounting approval for the movement of a half billion (500 million) dollars of previously non-claim expenses – now being reclassified as claim expenses – things like the cost of the wellness brochure production (how this is not sales is beyond me but then I am an actuary and not an account)and the cost of the nurse hotline on questions about your insurance and your provider’s suggested procedure.
The only thing that works is everyone adopting New York State rules – take the dollars paid to providers under the policy and divide by premium dollars received.
I am betting the the NAIC does not adopt anything as simple as that.
The tax on investment income is not a payment of a claim.
Indeed if 80% of the premium is “claims” then 20% is overhead and profit – if overhead is 15% then profit is 5% and tax is about 1% (ins. co. tax is my specialty and trust me it runs 20%, not 30 or 33 or 35%(these are the “legal” % depending on year and location) of actual profits after money is appropriately classified).
You can buy expenses or investment income or taxes on the international reinsurance market – and US regulators/tax authorities can not keep up with the game. Which why NY in my day just wanted it kept simple – claims paid ignoring reinsurance over Premiums earned ignoring reinsurance. But then “my day” was decades ago – and no one in the game is actually advising the NAIC or the Federal government.
I agree on corporate control of most things in America –
but the Obama folks caved to the corporations, with the progressives in Congress fighting for little things like claim loss ratios rather than premium control – and Obama fought the progressives on claim loss ratios – suggesting a 65% rate rather than the eventual 80% – and even then demanding no Federal rule making – leaving it to the states where the corporations control the insurance departments.
No – Obama deserves no credit – he has been “pure” corporate defender.-
You’re wrong about anti-fraud activities not being related to medical care. Many of the medical providers who cheat financially also are doing harm to patients by performing unneeded treatments, surgergies and other procedures that injury and even kill people. It’s through fraud investigations that these providers are detected. Health insurers are likely to disinvest in anti-fraud programs and that’s going to make health care more expensive for everyone.
http://www.insurancefraud.org/article.lasso?RecID=1798
Medicare fraud investigations cost a fraction of 1% and catch the majority of fraud – Ins co’s fraud investigations cost 5% of premium and are pointed at denying coverage – not really catching provider fraud.
Medicare could do a better job ob provider fraud – and still stay under 1% of premium.
Insurers do not give a damn about fraud – they only want to deny claims – the list of examples – searching to find out you forgot to mention the pre-teen visit to the doctor to get a cream for your pimples means your lung cancer 20 years later is not covered because of your “fraud” – is endless. There is even a name for this – a joke – it is called “claims underwriting”. Friends in Wellpoint denied it existed until it was proven in court.
The new law says in 2014 we ignore pre-existing conditions – unless there is fraud. Bet you the cost of fraud goes up in 2014.
Papau – Could you please tell me where you got the 1% and 5% figures from?