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.