The general public won't experience the full effect of healthcare reform for some time. But health insurers, arguably the group with the most at stake, are in the thick of what is turning out to be a lively battle with the Department of Health and Human Services over the law's finer points, which continue to evolve.
The latest conflict is over how Medical Loss Ratios (MLR), or the amount of premiums the government has directed health plans to spend directly on patient care, will be calculated. The Affordable Care Act mandates that insurers devote 80 to 85 percent of premiums to medical expenses. If the minimum MLR is not met, plans must offer rebates to policyholders.
Currently at issue is what constitutes a medical expense. If it were up to insurers, little would be off the table. This is why HHS is carefully mulling the specifics so as not to give too much leeway to insurers, but also not to crush them under a regulatory boot.
In late October, the National Association of Insurance Commissioners sent model regulations to HHS, which will use the NAIC recommendations as a basis for writing the official rules. "These recommendations are reasonable, achievable for insurers, and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers," read a statement from HHS Secretary Kathleen Sebelius.
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.