Similar to a health insurance policy, it's what isn't covered by HHS' interim final rule on medical loss ratios that has some healthcare and consumer groups worried about their benefits.
Rule on medical loss ratios has some worried
The 308-page set of regulations, which were issued Nov. 22 and are expected to be published Dec. 1 in the Federal Register, detail rules for how much premium revenue health insurers must spend on covering direct patient care. What they don't do is strengthen fraud-prevention efforts or offer financial assistance for the conversion to new disease classification codes used for billing insurance companies.
Hospital groups said they were generally pleased with the rule—which has a 60-day, public comment period from the time it is published in the register—that goes into effect on Jan. 1, 2011. Patient advocacy groups Families USA and Consumers Union said the regulations will give patients more power to demand quality. And America's Health Insurance Plans said the regulations acknowledged the potential for disruptions in the individual insurance market and make attempts to minimize those disruptions.
Under the regulations, unveiled last week at a news conference by HHS Secretary Kathleen Sebelius, insurance companies in the individual and small-group markets will be required to spend at least 80% of the premium dollars they collect on medical care and quality-improvement activities.
Insurance companies in the large group market will have to spend at least 85% on direct patient care and quality efforts. If they don't, these companies will be required to provide rebates to consumers in 2012. HHS estimates that the new rules will protect up to 74.8 million Americans, and that up to 9 million Americans could be eligible for rebates worth up to $1.4 billion, with rebates averaging about $164 a person.
The agency also estimates insurers will incur about $33 million to $67 million in one-time administrative costs and between $11 million to $29 million in annual ongoing administrative costs related to complying with the rule from 2011 to 2013.
The requirement to mandate the medical loss ratio was a key provision of the Patient Protection and Affordable Care Act. And as AHIP President and CEO Karen Ignagni noted in a statement, the regulation did account for potential disruptions in the insurance market and ways to avoid de-stabilization. For example, the health reform law allows HHS to adjust the medical loss ratio standard for a state if it's determined that meeting the 80% standard could destabilize the market. So far, Georgia, Iowa, Maine and South Carolina have requested such an exemption.
In the regulation, HHS said states' minimum MLR requirements were fairly low. About 10 states had loss-ratio requirements that were as low as 55% for at least some segments of the market, another 13 had minimum thresholds between 60% and 75%. HHS estimates that nine states have enacted minimum MLR thresholds or administrative-expense limits requiring that at least 80% of premiums be spent on clinical services in at least some market segments.
During the news conference, National Association of Insurance Commissioners President Jane Cline said the NAIC was pleased that HHS adopted the group's recommendations “without significant modification.”
But others had concerns over what the regulations did not address, such as AHIP's recommendations that the definition of healthcare quality initiatives include fraud-prevention and detection programs.
The interim final rule defines quality-improving activities as “being grounded in evidence-based medicine, designed to improve the quality of care received by an enrollee and capable of being objectively measured and producing verifiable results and achievements.”
In a letter to the NAIC, Ignagni said private plans allocate considerable resources to anti-fraud programs, which, in turn, help improve quality for Americans by identifying providers with false credentials who deliver care or who falsify medical records. Ignagni also has urged that the medical loss ratio include initial startup costs related to implementing the ICD-10 coding system as a quality initiative.
Chip Kahn, president and CEO of the Federation of American Hospitals, said fraud prevention is an essential service, but it's not healthcare. Overall, the FAH was pleased with last week's regulations. “What we wanted is that the 80% in the loss ratio go to patient care,” Kahn said. “That's where the rule ends up and we're very comfortable with that.”
Others, such as the group Consumer Watchdog, cited problems it sees with the regulations, including a measure that would allow insurers to deduct federal and state taxes, including income taxes, from their premium revenue; or including public health marketing campaigns as health quality improvements.
The more-relaxed rules of the mini-med plans, or those with limited employee benefits, are another concern. HHS said last week that issuers of mini-med plans will be required to do more reporting so HHS can receive and review data on their expense structures and profitability. The agency expects to collect such data for about a year before making decisions on how to apply an adjustment to the way the MLR is calculated for those plans.
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