NAIC Adopts Medical Loss Ratio Over Insurers’ Objections

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Oct 21st, 2010

NAIC Adopts Medical Loss Ratio Over Insurers’ Objections

The National Association of Insurance Commissioners (NAIC) voted today to adopt a set of regulations governing how medical loss ratios will be calculated under the new health-care reform law.

Under the Patient Protection and Affordable Care Act, insurers will be required, starting next year, to adhere to medical loss ratio requirements being put in place to guarantee at least 80 to 85 of the premium dollars they collect go to heath-care expenses — and not executive pay or marketing budgets.

The medical loss ratio requirements are expected to impact the large for-profit insurers most.

Insurance companies have been lobbying to get the requirement phased-in over time.

Karen Ignagni, president and CEO of America’s Health Insurance Plans, a health insurance industry trade group, said the move would “reduce competition, disrupt coverage, and threaten patients’ access to health plans’ quality improvement services,” she said.

Ignagni said to promote access to a wide range of health plan choices for consumers and employers, the new medical loss ratio requirements should include adequate adjustments that take into account the statistical variability and credibility of small blocks of covered lives in an environment where extremely high cost, but low-frequency claims can create major volatility.

The Washington, D.C.-based group’s recommendations include modifying the NAIC’s definition of health-care quality initiatives allowable as a health-care expense to include fraud prevention and detection programs and the initial startup costs associated with implementing the new coding requirements.

HHS Secretary Kathleen Sebelius released the following statement today regarding the National Association of Insurance Commissioners (NAIC) recommendations to HHS on medical loss ratio:

“We thank the NAIC for the recommendations, which the Commissioners finalized today on how best to implement the medical loss ratio policy, which will ensure consumers get the best value for their health care. We recognize that these recommendations are the result of many months of hard work by the Commissioners and their staff and we commend them for their open process and their responsible, thoughtful work.

“These recommendations are reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers.  Not only do they ensure consumers receive better value for their health care dollar, they recognize special circumstances in different markets to preserve market stability and employee coverage as we transition to the new marketplace in 2014.

“The next step is for the Department of Health and Human Services to issue a medical loss ratio regulation that will provide clear guidance to stakeholders in the coming weeks.

“We will work quickly to promulgate this regulation, using the NAIC recommendations as a basis, because we believe these new policies will help ensure not only cost savings but higher quality care for consumers. We look forward to working closely with NAIC throughout the process.”

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