NAIC Misses Initial Deadline On Medical Loss Ration Definition

Janice Simmons, June 3, 2010

The National Association of Insurance Commissioners (NAIC), in a letter to Health and Human Services Secretary Kathleen Sebelius, said it was unable to meet the revised deadline of June 1 set by HHS to translate what qualifies for health insurers for "medical loss ratio" in the new healthcare reform law.

"We certainly appreciate the need to complete this project as soon as possible—waiting until the [original] deadline of December 31, 2010, in the law is not an option—but we also appreciate, as you do, how critically important it is to do this right," said NAIC President Jane Cline, who is also the West Virginia insurance commissioner.

With the medical loss ratio, health insurers are to spend at least 80 cents out of every premium dollar on actual medical care in the individual and small group markets and at least 85 cents on that care in the large group market starting Jan. 1, 2011. Rebates would be owed to consumers if insurers failed to meet the ratios.

However, what exactly is considered medical care could have multiple definitions—as NAIC found out last month when it requested suggestions from healthcare providers, insurers, consumers, and others. Questions have come up whether it can mean areas such as nurse hotlines or disease management programs.

The NAIC noted further in its letter that the medical loss ratio and rebate program in the reform law have the potential to "destabilize the marketplace and significantly limit consumer choices if the definitions and calculations are too restrictive."

In addition, a medical loss ratio and rebate program could be "rendered useless if the definitions and calculations are too broad," it said. "Only through an open, deliberative process can we hope to reach a reasonable consensus that meets the dual objectives of protecting consumers and preserving competitive markets."

NAIC told HHS it will continue "to work diligently and transparently to complete its report on medical loss ratio, and will keep [HHS] updated on our progress." However, no new deadline was given.

Janice Simmons Janice Simmons is a senior editor and Washington, DC, correspondent for HealthLeaders Media Online. She can be reached at
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