Insurance regulators narrow definitions of care for medical-loss ratio rules

The AMA supports state insurance commissioners' proposed regulations under health reform, noting that they should help preserve patient access to physician care.

By Doug Trapp — Posted Nov. 1, 2010

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Anti-fraud efforts, enrollee incentives and marketing costs are among the expenses health plans should not classify as quality improvement or health care spending, according to model regulations an association of state insurance regulators approved Oct. 21.

Next year, the national health reform law requires health insurers to spend at least 80% of the premiums they collect for individual and small-group policies on patient care and quality improvement. The requirement increases to at least 85% of premiums for large group plans.

The health reform law delegated the decision of which expenses count toward this total -- a company's medical-loss ratio -- to the National Assn. of Insurance Commissioners and the Dept. of Health and Human Services. NAIC held five months of meetings and conference calls before adopting model regulations at its national meeting in Orlando, Fla. HHS will review the NAIC proposal and use it as a guide in the coming weeks to write a rule that defines what spending health insurers can count toward that 80% to 85% threshold, HHS Secretary Kathleen Sebelius said in a statement.

The proposed NAIC regulations are "reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers," she said.

The American Medical Association supports the NAIC-adopted regulations, said AMA President Cecil B. Wilson, MD. In ensuring that most premium dollars pay for medical care, the rules should help preserve patients' access to physician care, he added.

A major health plan association warned that the regulations would hurt consumers in the long run by limiting insurance companies' flexibility. "The current [medical-loss ratio] proposal will reduce competition, disrupt coverage, and threaten patients' access to health plans' quality improvement services," said Karen Ignagni, America's Health Insurance Plans president and CEO, in an Oct. 21 statement.

Health plans lobbied for medical-loss ratio to be calculated at the regional or national level, allowing them more flexibility to meet the new requirements. NAIC leaders rejected this request. The AMA also opposed the health plans' request and supported having the ratios calculated at the state level, where health insurance traditionally has been regulated, according to an Oct. 20 AMA comment letter to NAIC.

Health plans also lobbied NAIC to exclude insurance broker commissions and fees from both administrative expenses and health care spending. However, NAIC members declined the request. The AMA opposed this proposal as well.

The National Assn. of Health Underwriters, in an Oct. 21 statement, thanked NAIC for recommending that HHS establish a task force to examine the medical-loss ratio regulation's potential impact on consumer access to insurance agents and brokers. "We are pleased that the NAIC continues to recognize and underscore the essential role that health insurance agents and brokers serve in our health system," NAHU CEO Janet Trautwein said. Licensed health insurance agents, brokers, consultants and benefit professionals make up the organization.

Ignagni also said NAIC's definition of quality improvement needs to be expanded in the final HHS regulations. The regulations, she said, could prevent health plans from developing innovative methods of promoting health care quality.

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What's in and what's out

The National Assn. of Insurance Commissioners regulations adopted Oct. 21 are expected to influence an upcoming Dept. of Health and Human Services rule to determine what type of spending will satisfy a 2011 national health reform law requirement that health plans spend at least 80% of premiums on medical care or quality improvement.

Items NAIC considers quality improvement spending:

  • Investments to improve patient outcomes, such as identifying and encouraging evidence-based medicine and medication and care compliance initiatives.
  • Activities to prevent hospital readmission, such as comprehensive discharge planning and postdischarge counseling by appropriate health professionals.
  • Efforts to improve patient safety and reduce medical errors, such as identifying and using clinical practices to avoid harm and lowering the risk of infections acquired at medical facilities.
  • Wellness activities, such as lifestyle coaching programs with specific, measurable goals and public health or education programs carried out with local health departments.
  • Health information technology spending for health care quality improvements, including tracking whether specific interventions or bundles of services lead to better patient outcomes.

Items NAIC does not consider quality improvement spending:

  • Retrospective and concurrent utilization review.
  • Provider credentialing.
  • Fraud prevention, except for the amount recovered that reduces claims paid.
  • Marketing expenses.
  • Costs of calculating and administering enrollee or employee incentives.
  • Any other function or activity not specifically named as a medical or quality improvement expense.

Source: National Assn. of Insurance Commissioners, October (link)

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