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Health Insurers Win Some, Lose Some with MLR Rules

Jeff Elliott, for HealthLeaders Media, November 3, 2010

America's Health Insurance Plans (AHIP), the health insurance trade association, didn't waste any time expressing its displeasure with many policies, including items insurers were lobbying to have included in the definition of a medical expense such as claims processing technologies and ICD-10 implementation. AHIP believes it also got the raw deal with fraud prevention activities not considered a medical expense.

It's response via AHIP president and CEO Karen Ignagni was that MLR would "reduce competition, disrupt coverage, and threaten patients' access to health plans' quality improvement services."

Truth be told, health plans are privately applauding themselves for victory on other fronts including the NAIC recommendation that insurers should be able to deduct income taxes when calculating MLR.

NAIC also stood up for insurers by expressing concern that an MLR of 80% in the individual market was unlikely to be achieved by many insurers, explaining that existing contracts with predetermined commissions and marketing expenses will hamstring insurers for the near term. It urged HHS to lower the MLR during a transition period.

Opinions on MLR rules run the gamut, with HHS saying it's critical to help improve the quality of healthcare. Opponents believe that it's completely unnecessary and that market forces should ultimately determine how much insurers devote to medical expenses. Of course, these are more reflection of their thoughts on healthcare reform in general.

I applaud HHS—directed by law to impose the MLR—for listening to the industry. It will be interesting to see how what they've heard plays out in the final rules.

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