Haggling Over the Implementation Rules Begins

Insuring Resources Commentary:
An overused cliche is "the devil is in the details". Well many believe this health care legislatiobn is the devil, so you can imagine the fight over many of these details. As the federal HHS moves toward the implementation of the first health care rules the debate may not be as public, but it certainly will be contentious within the states themselves and between several states and HHS. On that last note, several states have infomred HHS that they will not establish their own High Risk Pool but instead let the feds do it. About 35 states already have high risk pools and the PPACA ,mandates their creation in the remaining states.... but, those states can allow the federal gov't to do it in their stead.

The article below concerns the PPACA's requirment regarding medical loss ratio's. This is "insurance-speak" for the percentage of premiums they spend on medical expenses. Defining what a “medical expense” is, it turns out, is crucial.




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It’s a simple question, but one with a complex answer: In health insurance, what counts as a medical expense?

Claims for visits to physicians clearly fit the bill; likewise for surgeries and hospital stays. But what about a 24-hour nursing hotline? Does a flier in the mail that encourages subscribers to reduce sodium intake count? Or a new computer system to better manage care for multiple chronic conditions?

This question is far from rhetorical. Under health care reform, insurers will be required to maintain certain “medical loss ratios,” insurance-speak for the percentage of premiums they spend on medical expenses. Defining what a “medical expense” is, it turns out, is crucial.

Insurers will have to spend at least 85 percent of subscriber premiums on medical expenses in small- and large-group markets and at least 80 percent in individual policies.

Insurers will have to report their medical loss ratios to the Department of Health and Human Services by the end of each year. Those who do not meet the requirements will face penalties.

The new law is meant as consumer protection to ensure that the vast majority of subscriber premiums go toward medical care rather than administrative costs or company profits.

But it has also forced a complicated, drawn-out debate among insurers, legislators and regulators over how best to define medical loss ratios.

Discussions and research on the subject began well before health care reform became law and will surely continue past June 1, the deadline for the first draft of medical loss ratio regulations.

The debate highlights how the Affordable Care Act, despite its breadth and length, still leaves much space for policy and political maneuvering.

Until now, insurer spending on medical expenses has gone largely unregulated. Only 13states set minimum medical loss ratios in the individual market, and even fewer police the group market.
The National Association of Insurance Commissioners recommends setting minimum loss ratios between 50 percent and 60 percent in the individual market, depending on characteristics of different policies.

States, though, have taken great liberty with these recommendations. North Dakota, for example, requires policies for individuals to reflect a minimum of 55 percent on medical expenses. In New Jersey, insurers must meet an 80 percent target.

A recent Senate report found that of six major insurance companies surveyed — Aetna, Cigna, Coventry, Humana, UnitedHealth and WellPoint — only Cigna would have met the proposed individual market target in 2009. The number, however, jumps to four in the large-group market.

Legislators are worried that insurers will reclassify administrative costs as medical to inflate their medical loss ratio in order to comply with the new law.

The Senate report singled out the insurance company WellPoint as already engaging in such behavior, shifting costs enough to raise its medical loss ratio 1.7 percent.

“This ‘accounting reclassification’ means that the company has converted more than a half-billion dollars of this year’s administrative expenses into medical expenses,” the report concludes.

WellPoint does not dispute reclassifying some previously administrative costs. But it says the costs reclassified, which included a nurse hotline and expenditures on a clinical health policy, fell well within the bounds of the proposed health care regulations, which allow “activities that improve health quality” to be counted as medical.

“We reclassified costs that are incurred to improve our members’ health and medical outcomes, and this is appropriate accounting treatment,” said WellPoint spokeswoman Kristin Binns. “We did not reclassify costs for network contracting, claims or customer service. In fact, we selected benefits that have been discussed as being part of the Medical Costs Ratio calculation in the various federal health reform proposals in an effort to be consistent with them.”

Insurance companies will help develop and comply with new medical loss ratio regulations. Robert Zirkelbach, communications director of industry group America’s Health Insurance Plans, says they “support transparency” when it comes to explaining how premiums are spent. But he also describes the new numbers as “arbitrary” and not based on any current industry practices.

The process highlights tensions between insurance companies and government officials tasked with regulating them.
A Senate aide familiar with the issue recalls “enormous pushback” from some insurers to requests for medical loss ratio information. “It was striking,” the aide said, “given how much they relied on that data for their analysts.”

The National Association of Insurance Commissioners, a consortium of state-level officials, is supposed to play middleman between legislators and insurers.

In the Affordable Care Act, the Department of Health and Human Services designated NAIC as the agency that would draft definitions and regulations of the medical loss ratio provisions.

NAIC currently has two task forces at work on the issue, both holding weekly conference calls and circulating numerous proposals and calls for input.

One recent phone call, attended by POLITICO, attracted insurance commissioners, consumer advocates and insurers. All discussed the best way to calculate a medical loss ratio.

Public comment on the medical loss ratio provision closes May 14 and, by the end of the month, NAIC will submit a first draft of guidelines to the Department of Health and Human Services.

“Ultimately, our process is pretty objective,” said Kim Holland, NAIC secretary and treasurer, who is Oklahoma’s insurance commissioner. At the end of the day, she says, complicated areas of insurance policy are regulated in the same way as simpler provisions: “We’ll develop a standard, require insurers to meet it, and, if they don’t, they will get sanctioned.”




Read more: http://www.politico.com/news/stories/0510/36703_Page2.html#ixzz0nARF1RBu