The Department of Health and Human Services has released an interim final rule to implement medical loss ratio requirements for health insurers under the Accountable Care Act.
The rule is scheduled for official publication on Dec. 1 and has an effective date of Jan. 1, 2011.
To reduce excessive administrative costs, the health reform law mandates that insurers spend a minimum amount of revenue from premiums on payment for clinical care. This is the "medical loss ratio" and the minimum level is set in the new law at 85% for the large group market and 80% for the small group market.
Insurers have been negotiating with federal regulators on what activities will be counted as administrative, and which of those activities could be considered as clinical functions beyond treatment, such as preventive and disease management programs.
In other words, insurers hope to get to the 15% to 20% administrative threshold by having some costs that now are considered administrative counted on the clinical side.
Karen Ignagni, president and CEO, at the America’s Health Insurance Plans says that the MLR regulations issued by HHS "acknowledge the potential for individual insurance market disruption and take a first step toward minimizing such disruptions."
She adds "the potential for disruption to employer-provided coverage should also be acknowledged and addressed." More consideration, however, "needs to be given to the cost of federally mandated investments in modernizing claims coding and the value of health plans’ programs to prevent fraud," Ignagni says.
"The HHS rules are certainly not as bad as they could have been, considering the demands of the health insurance lobbyists who swarmed the agency," says Judy Dugan, research director of Consumer Watchdog, a consumer advocacy group.
"But the industry will take every advantage of new tax deductions and the definition of 'health quality improvements' that can be counted as health care. HHS will have to focus its measurement and enforcement on these loopholes, and act to correct the regulations to stop abuses," she adds.
Her organization lauded HHS for not allowing "much broader loopholes that would have obliterated the intent of the minimum medical loss ratio."
However, the group’s key concerns with the regulations include the following: inclusion of public health marketing campaigns as "health quality improvements"; excessive tax deductions; and lack of transparency for administrative costs counted as "health quality improvements."
In addition, under the MLR rules, mini-med plans will be allowed minimum health care ratios as low as 40%, as opposed to the 85% level of the standard employee insurance.
"HHS has a tough job ahead of it, monitoring both the national corporate behavior of the insurance industry and varying levels of enforcement of the MLR regulations in the states," says Carmen Balber, the Washington, D.C. director for the group. "Insurer lobbies know that public attention to these rules will fade, and will be waiting to pounce. But the consumer benefit in the regulations is already razor-thin, so HHS cannot give an inch," she adds.
Meanwhile, some organizations, particularly the Medical Group Management Association, hope the medical loss ratio requirement compels insurers to become more efficient on the administration side and accelerate adoption of standards-based electronic financial and administrative transactions.
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