Democratic lawmakers put pressure on the insurance industry last week to cease and desist with attempts to undermine a new health reform provision that specifies how they can spend premium dollars.
Let the haggling begin
Medical-loss-ratio provision stirs up debate
The insurers lobbying group America's Health Insurance Plans abruptly fired back with its own stipulations on the medical-loss ratio requirements of the Patient Protection and Affordable Care Act, namely that they preserve quality and take steps to avoid disruptions in coverage.
Medical loss ratio, or MLR, refers to the minimum percentage of premium revenue that must be spent on medical care. Under the new reform law, insurers must spend at least 85% of premium dollars for large group coverage and 80% for small group and individual coverage on medical care, starting next year.
Adding fuel to the debate, grassroots organization Health Care for America Now released a report on July 22 that accused insurers of cajoling state regulators to weaken the new MLR minimum requirements.
“There's a new fight in healthcare reform, and if the insurance industry wins it, we lose,” said Ethan Rome, HCAN's executive director, who was joined by Sen. Al Franken (D-Minn.) and Rep. Bill Pascrell Jr. (D-N.J.) at a news briefing to release the report's findings. Franken called the new MLR provision “one of the best tools to limit insurer profits and put the brake on premiums.” Specifically, it's designed to prevent insurers from overspending on administrative costs such as marketing, salaries, underwriting, claims processing and overhead.
Whether the law's intent is ultimately respected, however, “depends on how state and federal regulators define which expenditures should be classified as legitimate medical costs,” the report stated. HCAN cautioned that the insurance lobby wanted to redefine medical loss ratios by pressuring the National Association of Insurance Commissioners “to give insurers vast discretion over what expenses they may classify as clinical and administrative costs.” WellPoint, as an example, has already “reclassified” more than $500 million of administrative costs as medical expenses “in its bid to stampede regulators into accepting its preferred formula,” the report asserted. This has the potential to increase WellPoint's corporatewide MLR by 1.7 percentage points without improving the value of its plans, the report stated.
HHS had asked the NAIC to supply guidance on MLRs by June 1, but NAIC officials said because of the complexity of the issue, they need more time. Kevin McCarty, Florida's commissioner of the office of insurance regulation, said it hopes to have recommendations to deliver to HHS by August or September.
“It's ironic that the insurance companies that advocated so vehemently for so-called free market principles last year are working so diligently to manipulate the insurance market this year through their lobbyists in Washington,” Pascrell said.
Another lawmaker, Sen. Jay Rockefeller (D-W.Va.) also weighed in on the issue, urging NAIC Commissioner Jane Cline in a letter to resist the pressure that's being applied by the insurance industry. “Making sure health insurance companies spend more of every premium dollar on patient care was a core component of healthcare reform,” he wrote.
But AHIP has long maintained that the new MLR requirements may prove disadvantageous to patients, that certain support programs and tools health plans use—such as nurse call lines and wellness programs—may be counted as “administrative costs” and then disappear under this new provision. Robert Zirkelbach, spokesman for America's Health Insurance Plans, attacked the HCAN findings, calling the report “a desperate attempt to distract attention away from the fact that these regulations could put at risk important services and benefits that improve the quality of care for millions of patients.”
AHIP in a paper issued last week sets its own policy goals for the MLR requirements. Among other things, the provision should ensure the preservation of existing efforts to improve quality, and new initiatives to support the goals of the reform law are not discouraged, the trade group stated. Building on the notion that quality improvement initiatives can be included in the MLR requirements, AHIP believes that a number of programs health plans offer, such as disease-management, wellness and care-coordination programs; nurse call lines; patient-safety efforts; education; and value-based purchasing programs, should all be classified in this category.
And some state insurance commissioners agreed. “Many aspects to nurse hotlines are about making sure people get the care they need,” Sandy Praeger, Kansas insurance commissioner, said last week during a news conference at an NAIC meeting in Washington.
The NAIC defended itself against accusations that it is being swayed by the insurance industry. “The process has been completely transparent,” said Vanessa Sink, spokeswoman for the NAIC. “We are pleased that so many interested parties have offered constructive criticism on how best to develop these definitions.”
Susan Voss, NAIC president-elect and Iowa insurance commissioner, said she agreed to take a meeting with the Blue Cross and Blue Shield Association.
The NAIC is slated to discuss the MLR definitions at a meeting in mid-August in Seattle.
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