Healthcare Business News

FAH weighs in on medical-loss provision

By Rebecca Vesely
Posted: May 11, 2010 - 3:00 pm ET

The Federation of American Hospitals says some wellness and physician pay-for-performance programs should not be counted as quality-improvement initiatives in forthcoming federal regulations that will determine how health insurers can spend premium dollars.

Under the health reform law, starting in 2011, health insurers must spend at least 85% of subscriber premiums on medical costs in group coverage plans, and at least 80% in individual plans.

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The HHS is accepting public comment on the draft regulations of this medical-loss ratio provision through May 14. Interim regulations are expected June 1.

In a five-page comment letter, the Federation of American Hospitals urged the HHS to make sure that no nonmedical spending is counted in the new rules. For instance, only the portion of capitation payments—where insurers pay providers for a defined set of services—that reimburses licensed providers for direct patient care should be allowable, the federation said in the letter.

Insurers will be able to count quality-improvement activities as part of their minimum-loss ratio, under the health reform law.

The federation says only programs “specifically designed to improve healthcare quality for a particular patient” should be allowed in this quality category. This would exclude certain pay-for-performance, health education and disease-management and wellness programs.

The quality-improvement provision “requires a close focus by federal regulators to avoid becoming a ‘catch all' into which a wide variety of expenses not directly related to patient care and clinical service quality may arbitrarily be placed,” Chip Kahn, president and CEO of the Federation of American Hospitals, wrote in the letter.



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