Sebelius Touts Early Successes In Impelmenting Reform, Consumer Advocates Warn Of Industry Manipulation

Kathleen Sebelius has written a letter to House Speaker Nancy Pelosi (D-CA), Rep. John Boehner (R-OH), Sen. Harry Reid (D-NV) and Sen. Mitch McConnell (R-KY) touting the administration’s success in implementing the early provisions of the health reform law ahead of schedule. Indeed, just yesterday the Department of Health and Human Services released fairly broad interim rules allowing children to stay on their parents’ health insurance plans until age 26, sent applications to the 30 states that have decided to form their own temporary high risk insurance pools, and has unveiled the reinsurance program for early retirees. Last month, the IRS also “released guidance and began delivering post cards to the estimated four million small business and tax exempt organizations” who may qualify for the credit.

In the near term, the calender looks something like this:

– June 1: HHS will receive uniform definitions from the NAIC about medical loss ratio definitions

– June 1: The early retiree reinsurance program will begin.

– June 15: Seniors will receive $250 rebate towards the Medicare Part D doughnut hole.

– July 1: High-risk insurance pools are set to begin

– September 23: Insurers can’t deny coverage to children because of pre-existing conditions

– September 2010: Secretary will promulgate regulations relating to waiver of state innovations.

The new medical loss ratio (MLR) and rate review standards are one of the few ways regulators can control insurance premiums (and insurance profits) before the exchanges become operational in 2014 and some lawmakers and consumer groups have expressed concern “that the health insurance industry is mounting an all-out effort to weaken” these consumer protection provisions.

Last week, Sen. Jay Rockefeller (D-WV) wrote Sebelius asking her to adopt tighter medical loss ratio definitions to prevent insures from shifting administrative expenses into a new accounting category adopted by the law — “activities that improve health care quality” — and artificially inflating their MLRs to comply with the new requirements. He recommended that insurers be required to “demonstrate that these expenses will improve health care quality.”

Consumer representatives at the National Association of Insurance Consumers have also put together a report advising lawmakers and the NAIC — which is tasked with sending recommendations to the Secretary — on how to structure and define provisions in a way that best serves the consumers’ interests. On rate review, the report recommends that insurers file rate increases no less than 90 days in advance of the proposed effective date and publish the filings online for public review. Affected policyholders should be allowed to request a hearing about the premiums, which could be overturned by individual insurance departments if they are deemed ‘unreasonable.’ Rates should be deemed unreasonable, the report recommends, if “the rates are likely to produce a profit from businesses in this sate that is unreasonably high to the benefits provided,” or if the they are set to replenish investment losses.

On MLR, the report agrees with Rockefeller, noting that “the new regulations should not allow insurers to classify expenses for which there is little or no evidence that the related activities ‘improve quality.'” It also notes that “insures should be prohibited form grouping their plans together to makes the low MLRs of some of their plans.” Read the full report here.