Medical Loss Ratio Interim Regulation: Advocates Must Remain Vigilant

 November 22, 2010
 
The Department of Health and Human Services today issued interim final regulations on the definition of the Medical Loss Ratio, a key instrument for controlling insurance company charges.  While the regulations overall provide important protections for consumers, they also allow insurance companies to count as medical expenses certain “wellness” activities “that increase the likelihood of desired health outcomes.”

The EQUAL Health Network and our partners have noted that this provision opens opportunities for the insurance industry to game the system.  We encourage researchers, advocates and regulators to continue to submit comments on this issue, and to ensure that the medical loss ratio is rigorously implemented and enforced.

The Affordable Care Act (ACA) requires health insurance companies to spend at least a minimum percent of premium dollars on the medical claims of subscribers. Companies that fail this test must provide rebates to those same subscribers. The intent of imposing the MLR is to “bring down the cost of health care coverage” and “ensure that consumers receive value for their premium payments.” It should provide incentives to the health insurance industry to actually pay claims instead of denying them, to operate efficiently, and to negotiate assertively with health care providers, rather than simply passing on cost increases to consumers. But companies can frustrate the intent of the law by inflating medical claims to include other expenses, including marketing expenses typically considered part of administration.

Written comments may be submitted within the next 60 days, at http://www.regulations.gov  Follow the instructions under the “More Search Options” tab.

To send your comments to HHS sign EQUAL’s online petition: http://www.change.org/centerforpolicyanalysis/petitions/view/hhs_prevent_insurance_co_abuses_set_a_fair_medical_loss_ratio

The regulation and other technical information are available online here: MLR Interim Final Regs 11-22-10  and  at http://www.hhs.gov/ociio/regulations/index.html

For a copy of this statement and a side-by-side of the HHS Regs compared with NAIC’s recommendations:  EQUAL Side-by-Side HHS and NAIC on MLR “Wellness” programs

 

Health Affairs on Medical Loss Ratio:  Add your comments to EQUAL’s
 
Ellen Shaffer and Bob Mason of EQUAL Health Network comment on the Health Affairs blog.  Add your views online:
 
 

            The NAIC draft regulations on the medical loss ratio (MLR) open a gaping “greenwashing” loophole that will let insurance companies count marketing expenses and ill-defined wellness programs as medical care. Congress has documented that “MLR shifting” has already begun.

            The “wellness” activities permitted to count as medical expenses could include “Activities that increase the likelihood of desired health outcomes.” While buying a lottery ticket might not count, the entire section invites abuse.

            The standard goes well beyond both the new Affordable Care Act (ACA) and existing state laws and opens an entirely new category of expenses that insurance companies can rely on to justify reduced spending on care for subscribers, and thus denials of care. It will frustrate the aims of the law and instead give undue weight to the views and interests of the insurance industry. This standard must be fixed by HHS.

            The Affordable Care Act (ACA) requires health insurance companies to spend at least a minimum percent of premium dollars on the medical claims of subscribers. Companies that fail this test must provide rebates to those same subscribers. The intent of imposing the MLR is to “bring down the cost of health care coverage” and “ensure that consumers receive value for their premium payments.” It should provide incentives to the health insurance industry to actually pay claims instead of denying them, to operate efficiently, and to negotiate assertively with health care providers, rather than simply passing on cost increases to consumers. But companies can frustrate the intent of the law by inflating medical claims to include other expenses, including marketing expenses typically considered part of administration.

            The insurance industry has already begun to manipulate the MLR rules for its own gain, and has stated its intention to game the system by raising premiums to make up for any constraints imposed by the new law, The Senate Commerce Committee has documented that, “At least one company, WellPoint, has already ‘reclassified’ more than half a billion dollars of administrative expenses as medical expenses, and a leading industry analyst recently released a report explaining how the new law gives for-profit insurers a powerful new incentive to ‘MLR shift’ their previously identified administrative expenses.”

            It is vital that the “medical” and “quality improvement” portion of insurance expenditures be defined strictly, and that standardized reporting requirements be detailed to prevent miscategorization of administrative expenses. HHS should address this problem when it certifies the NAIC’s proposal.

Bob Mason
EQUAL Health Network

1. Fundamental to genuine Health Care Reform is defining the acceptable rules of insurance provider behavior in way that makes successful regulation realistic and possible.

2. Above all, this means NOT allowing loopholes or exceptions by which insurers can do creative bookkeeping. In this example, the insurers wish to create ‘wellness’ or ‘public health’ campaigns of their own devise, or ones they can control or manipulate, and call this medicine.

3. Anyone who has seen the glossy wellness magazines sent by insurers to the insured should recognize self-serving advertising for what it is. It is impossible for the department of Health and Human Services to read, analyze and police each of these publications and programs to determine if genuinely useful medical advice prevails, or if this should, charitably, be called administrative expenses.

4. Hence all this fancy footwork should be denied: only solid medical care, delivered by providers who actually see their patients, should count as medical loss. All the rest is the noise of Administration and profit, and must be seen as such.

LOSS RATIO: HEALTH INSURANCE REGULATIONS  MUST BE STRONGER TO BENEFIT THE PUBLIC   

 Ellen R. Shaffer, PhD MPH, Co-Director, EQUAL Health Network
The National Association of Insurance Commissioners has resisted some of the most egregious demands of the insurance industry in defining the medical loss ratio, a key element of the new health care reform law intended to rein in insurance industry abuses and control premiums. The NAIC’s proposal now goes to the Department of Health and Human Services.
 
HHS must take an additional step to protect consumers:  Eliminate the “greenwashing” loophole that will let insurance companies count certain marketing expenses as medical care. 
  
Download Statement, 10/21/10:
 
UPDATE, 10/11:  The EQUAL Health Network, California Conference of Local Health Officers, comment to the NAIC:
The Affordable Care Act (ACA) empowers the Secretary of the Department of Health and Human Services (HHS) to implement the law in a way that benefits the public. On the key issue of Medical Loss Ratios (MLR), the law requires health insurance companies to spend at least a minimum percent of premium dollars on the medical claims of subscribers.  Companies that fail this test must provide rebates to subscribers. The intent of imposing the MLR is to “bring down the cost of health care coverage” and “ensure that consumers receive value for their premium payments.”  It should provide incentives to the health insurance industry to operate efficiently and negotiate assertively with health care providers, rather than simply passing on cost increases to consumers.

 Companies can frustrate the intent of the law by defining medical claims to include other expenses, including marketing expenses typically considered part of administration.

The National Association of Insurance Commissioners (NAIC) approved proposed regulations to define the MLR on August 17, 2010. A revised draft will be reviewed on Oct. 14 by the “B” Committee of NAIC. When completed the proposal will be subject to certification by the Secretary of HHS.

The current proposal would count “Activities that increase the likelihood of desired health outcomes,” and specifically “Public health education campaigns that are performed in conjunction with state or local health departments,” as medical expenses rather than administrative expenses. This standard goes beyond the law (ACA Section 2718), and opens an entirely new category of expenses that insurance companies can rely on to justify reduced spending on care for subscribers, and thus denials of care. It will frustrate the aims of the law and instead give undue weight to the views and interests of the insurance industry.  We urge the NAIC to strike this section.

EQUAL: MLR Must Serve the Public

The National Association of Insurance Commissioners has resisted some of the most egregious demands of the insurance industry in defining the medical loss ratio, a key element of the new health care reform law intended to rein in insurance industry abuses and control premiums. The NAIC’s proposal now goes to the Department of Health and Human Services.

HHS must take an additional step to protect consumers:  Eliminate the “greenwashing” loophole that will let insurance companies count certain marketing expenses as medical care.

______________________________________________________

Also:  EQUAL Fellow Robert Mason comments: Regulations under consideration by HHS would allow insurance companies to count money spent on programs to promote public health as medical expenses, thus allowing them to spend less on covering actual medical claims. One provision allows programs run in collaboration with local health departments, such as educational outreach programs to improve health life-styles, to count in this way. These kinds of programs are at first glance attractive – corporations, which have money, funding public health organizations, that do not, to carry out programs that help everyone.

 
UPDATE, 9/23: NAIC has issued its draft medical loss ratio regulation. The group is inviting comment on the regulation by Oct. 4. The NAIC hopes to adopt the regulation later next month and send it to the Department of Health and Human Services for certification, as required by the healthcare reform law.
 
The NAIC solicits comments on this draft. Comments should be sent to Eric King, NAIC, at EKing@naic.org and John Engelhardt, NAIC, at JEngelha@naic.org by October 4, 2010.
 
The EQUAL Health Network will submit comments.
   
The proposed regulation, while positive in many respects for consusmers, continues to include a break for insurance company partnerships with public health departments, efforts commonly misused as a form of “greenwashing.”
 
Latest version here:   ppaca_sub_draft_mlr_rebate_reg
 
Earlier post, Aug. 24:
Should insurance companies be able to get off the hook for paying rebates to customers, who may believe their company is unfairly denying them specific medical care in order to save money, by virtue of engaging in health promotion campaigns?
 
On Aug. 17 the National Association of Insurance Commissioners issued proposed rules for measuring the Medical Loss Ratio (MLR), a key instrument for controlling health insurance premiums.  The MLR is the  80-85% of premiums that new law requires insurance companies to spend on medical care, or improvements to the quality of care.  Companies that fail to meet that test must give suscribers a rebate. The usually out-gunned consumer representatives at the NAIC supported the state insurance commissioners’ vote to adopt the proposed rules unanimously, claiming a victory against insurance industry lobbyists.
 
But a key provision that slipped through threatens both the effectiveness of the MLR, and the integrity of public health departments.  The U.S. Department of Health and Human Services (HHS) is backing a late amendment that would allow insurance companies to count their collaborations with public health departments as quality improvements. 
 
What this means:  Partnerships between private, for-profit health insurance companies and cash-strapped public health departments would be counted as part of the expenditures of your premium dollars to improve your health. 
 
The key question is this: Should insurance companies be able to get off the hook for paying rebates to customers, who may believe their company is unfairly denying them specific medical care in order to save money, by virtue of engaging in health promotion campaigns? 
 
Even assuming you like the idea of entrusting health promotion campaigns to your health insurance company, is the MLR a remotely suitable mechanism for encouraging them to engage in these canpaigns?  
This is a classic mismatch of policy priorities.
 
There aren’t a lot of these partnerships now – at least not legitimate ones. Most often they take the form of community awareness campaigns on public health issues such as smoking cessation.  If this rule stands, we can likely look forward to increasing insurance industry incursions into public health territory. So what?  At least 4 things: 1. The prospect of undue influence by the industry. 2. Premium dollars frittered away on meaningless “health awareness” campaigns, which are in fact marketing masquerading as improvements in medical care. 3. Undermining real public health department initiatives, and funding for same, as already scarce public health staff are diverted to determining whether particular insurance company campaigns are legitimate or not. 4. Smoking cessation campaigns, for exanple, can help insurance companies cherry-pick customers, either excluding smokers from coverage, or charging them more (the excess charges remain legal even after 2014).
Interestingly, the insurance industry is also lobbying not to count investment income, or the taxes they pay on investment income, as, well, income, for purposes of calclating the MLR. Those are the taxes that they should be paying to support our state and local health departments.
 
Want to do something about it?  Drop a note to ershaffer@gmail.com
Background below:

EQUAL MLR Public Health Statement

 But the historical record, when examined, turns this assumption on its head. The promise of money for good works from interested corporations inevitably undermines the capacity of governmental bodies to aggressively regulate those industries. Though there are not enough examples of explicit partnerships between local health departments and the health care insurance industry to demonstrate this directly, extremely powerful evidence can found in another place: the prodigious archives that document the interaction between public health authorities and a different highly profitable industry interested in touting itself as a socially responsible player regarding the public’s health: the tobacco industry.

Public Health and Corporate Partnerships: The Dangers of Health Care Industry Green-washing under the Guise of Reform

NAIC approved reporting form (blank):
http://www.naic.org/documents/index_health_reform_mlr_blanks_proposal.pdf

Letter from AHIP’s Karen Ignagni (these proposals were resisted): http://www.politico.com/static/PPM153_ahip_081510.html

Sarah Kliff – Politico – Commissioners OK health rate plan: (excerpt below)

It was a rare moment in the drawn out and highly partisan health care debate: a unanimous vote.

The National Association of Insurance Commissioners approved Tuesday morning a preliminary outline of what insurers will be able to count as medical costs, a document necessitated by the health reform bill’s requirement that insurers spend at least 85 percent of subscriber premiums on medical costs in the large group market and 80 percent for small group and individual plans.

Despite divided political views on the health reform law, all commissioners voted together to approve the document, a move forward that drew the ire of insurers.

“It’s extremely noteworthy that you heard … very diverse perspectives on the bill and the impact of the bill, but the vote was unanimous,” NAIC CEO Terri Vaughan told POLITICO after the vote. “That’s a very powerful statement on the hard work this organization did.”

The commissioners moved forward with a proposed “blank,” NAIC terminology for an insurers’ filing document, as well as 10 of 11 proposed amendments. They approved amendments that narrow inclusions of utilization review in the calculation and expand the definition of “wellness and health promotion activities” to include “public health marketing campaigns that are performed in conjunction with state or local health departments.”

The one rejected amendment would have allowed insurers to count accreditation fees as a “quality improvement” cost, thus making it a part of medical spending.

November 22, 2010

 The Department of Health and Human Services today issued interim final regulations on the definition of the Medical Loss Ratio, a key instrument for controlling insurance company charges.  While the regulations overall provide important protections for consumers, they also allow insurance companies to count as medical expenses certain “wellness” activities “that increase the likelihood of desired health outcomes.”

 The EQUAL Health Network and our partners have noted that this provision opens opportunities for the insurance industry to game the system.  We encourage researchers, advocates and regulators to ensure that the medical loss ratio is rigorously implemented and enforced.

 The Affordable Care Act (ACA) requires health insurance companies to spend at least a minimum percent of premium dollars on the medical claims of subscribers. Companies that fail this test must provide rebates to those same subscribers. The intent of imposing the MLR is to “bring down the cost of health care coverage” and “ensure that consumers receive value for their premium payments.” It should provide incentives to the health insurance industry to actually pay claims instead of denying them, to operate efficiently, and to negotiate assertively with health care providers, rather than simply passing on cost increases to consumers. But companies can frustrate the intent of the law by inflating medical claims to include other expenses, including marketing expenses typically considered part of administration.

 Written comments may be submitted within the next 60 days, at http://www.regulations.gov. Follow the instructions under the “More Search Options” tab.

 The regulation and other technical information are available online here:

MLR Interim Final Regs  and  at http://www.hhs.gov/ociio/regulations/index.html

To show your support for accountable regulations, sign EQUAL’s online petition:

http://www.change.org/centerforpolicyanalysis/petitions/view/hhs_prevent_insurance_co_abuses_set_a_fair_medical_loss_ratio

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