NAIC Draft on Medical Loss Ratios Open for Comment

Public comments can be made until Oct. 4 on the draft prepared by the National Association of Insurance Commissioners (NAIC) on medical loss ratios (MLRs). These are limits to be placed on health insurance plans beginning Jan. 1 that specify how many premium dollars may go toward medical care versus administrative costs and profits.

Some comments may include suggestions that the federal government include phasing in of the requirements in the states—specifically to avoid a sudden flight of insurers providing small market and individual coverage. The healthcare reform legislation passed six months ago calls for an MLR of 85% for insurers providing large group coverage and 80% for those providing coverage to the individual and small group health insurance market.

Concerns have been raised, though, on whether the insurers providing coverage to smaller group health markets would be able to meet the MLR requirements—due in part to higher overhead expenses and fees.

Last week, several state insurance commissioners, during a White House meeting with Obama administration members, emphasized that a phased-in approach could help avoid disruption in their states' insurance markets. Officials from Iowa and Maine specifically requested waivers to gradually phase in the MLR rules through 2014.

In a letter last week to Health and Human Services Secretary Kathleen Sebelius, Iowa Insurance Commission Susan Voss said that Iowa has had some of the lowest health insurance rates in the country, with a market that includes a large health insurance carrier and several smaller insurance carriers in the individual market. However, the state is already seeing carriers with small numbers of insurers in the individual market "announce their intent to cease business in our state," Voss said.

Among the rules included in the draft that may be welcome news for health insurers are provisions that would allow them to include spending on wellness programs and healthcare hotlines as expenses—but only in instances where the focus is on improving the quality of care. Insurers also would be permitted under the draft guidelines to exclude most federal and state taxes from MLR calculations—except for those federal income taxes on investment income and capital gains.

Following the public comment period, the draft must be approved by additional NAIC committees and then voted on by the membership of the NAIC at its annual meeting later in October. That version will then be sent to Sebelius' office.