Draft MLR Guidelines Present Mixed Bag For Consumers, Insurers

Yesterday, the National Association of Insurance Commissioners (NAIC) released draft guidelines for how insurers should calculate their expenditures to meet new regulations that require issuers that don’t spend 80 to 85 percent of premium dollars on health care expenditures to send rebates to their customers. These percentages are calculated from a ratio of “health expenditures” to other expenses and since reform became law, insurers have pressured the NAIC to calculate include certain administrative expenses as medical costs, exclude all federal taxes from their revenue (the denominator in the MLR ratio), and allow insurers to aggregate the ratio across plans and markets.

Consumer advocates I’ve spoken to tell me that yesterday’s draft regulations — which are now in an open comment period until October 4 — are somewhat of a mixed bag for all parties involved. On the crucial issues:

– TAXES: NAIC rejected the Congressional Committee chair’s statement that they only meant to allow issuers to deduct those taxes that are specifically related to the Affordable Care Act. It ruled that issuers can exclude all federal taxes but those on investment income.

– DEFINING HEALTH COSTS: NAIC rejected insurers’ suggestion that services like anti-fraud and “utilization review” be included in the definition of “medical expenses,” included other services that have not been traditionally classified as “medical,” and required issuers to substantiate why certain services improve care quality.

– AGGREGATION: Insures wanted the NAIC to calculate their MLRs across different units and markets. This would have allowed insures to group their plans together to mask the low MLRs of some of their plans. The draft guidelines would require issuers to break them down and account for the MLRs separately at every business unit in every state.preventing them from obscuring some low MLR plans.

Insurance commissioners also met with the President on Wednesday to ask that plans in the individual market be allowed several years to comply with the new MLR requirements, something the administration could allow if it believes that immediate compliance could lead to serious market disruption. A large concern here is the state of insurance brokers, whose salaries make up a large portion of non health care related spending. Similarly, two states Maine and Iowa, “have asked for a waiver from the rules until 2014 to give health insurers more time to adapt.”

The regulators hope to finalize the rules at an Oct. 21 meeting in Orlando, Fla., and then the Department of Health and Human Services will have the final say.