By N.C. Aizenman
Washington Post Staff Writer
Wednesday, October 6, 2010; 8:15 PM
At first blush, the mandate in the new health-care law sounds simple: Starting next year, health insurers must use at least 80 to 85 percent of the premium dollars they collect to pay medical bills or otherwise improve their customers' health.
But deciding which expenses insurers can include has been proving a monumental and controversial task for the National Association of Insurance Commissioners, an independent body made up of state insurance commissioners that the law tasked with advising the federal government on the issue.
Write the "medical loss ratio" rules too expansively, consumer advocates warn, and insurers will subvert the spirit of the law by passing off overhead and administrative expenses as activities that benefit patient health. Write the rules too narrowly, insurers counter, and plans may be squeezed out of business or forced to cut back initiatives that are genuinely helpful to patients.
For months, NAIC officials have been holding hours-long conference calls, poring over hundreds of public comments and revising draft upon draft of their suggested guidelines.
Now the NAIC has entered the homestretch. As soon as Oct. 14, the last committee charged with signing off on its proposed regulations could hold its final vote, likely enabling the NAIC as a whole to approve its completed recommendations to the Department of Health and Human Services at its meeting in Orlando this month.
HHS officials aren't obliged to adopt the commissioners' advice, but HHS Secretary Kathleen Sebelius has indicated that, for the most part, she will follow it closely.
Among the top issues still in play is the question of taxes. The law allows insurers to remove federal and state taxes and regulatory and licensing fees from the medical loss ratio calculation. But what does that cover? Over the summer, several Democratic members of Congress involved in drafting the law wrote a letter to Sebelius stating that their intent had been to exclude only federal taxes and fees "that relate specifically to revenue derived from the provision of health insurance coverage that were included in the [law]." That would force insurers to count as administrative expenses whole categories of taxes, such as those they pay on investment income and capital gains. Insurers cried foul, accusing Democrats of trying to illegally rewrite the law after the fact.
In a portion of the draft rules the NAIC signed off on in August, commissioners used an expansive definition of the taxes that insurers can exclude.
Consumer advocates are hoping that the commissioners or Sebelius will ultimately opt for a stricter interpretation, said Carmen Balber, Washington director of the nonprofit group Consumer Watchdog.
"At the end of the day, how much money health insurers are able to exclude from the amount they have to pay on health care will determine whether or not the health law's mandate that more money go to patient care is really enacted," she said.
Still, on most other questions, Balber said she was pleased with the NAIC's direction. For instance, the current draft requires insurers to meet the medical loss ratio for each separate plan they offer, rather than allowing them to lump all plans across states or types together in one aggregate calculation.
Similarly, in the related draft rules finalized this summer, the NAIC decided that insurers must count as administrative much of the cost of their anti-fraud efforts, as well as compliance with the law's mandate that insurers vastly simplify how procedures are coded.
Karen Ignagni, president of America's Health Insurance Plans, one of the insurance industry's most prominent trade groups, said she hopes the NAIC or HHS will revisit both issues. Fraud detection, she noted, can involve tracking doctors who prescribe inappropriate and even dangerous medications and tests. Simplified coding offers not only insurers but doctors a more complete picture of a patient's treatment history as they consider how to move forward.
"These are issues that are very much associated with how we improve and maintain quality," Ignagni said.
Insurers are also pushing the NAIC and HHS to come up with more-specific guidelines to exempt certain plans from the medical loss ratio requirements or phase them in more slowly than called for by the law. Otherwise, all plans created after the law's adoption - with the exception of those fully funded by employers - will be required to comply starting Jan. 1 and send rebate checks to their customers in 2012 for any profits or non-health expenditures above 15 to 20 percent of premiums they collect in 2011.
Several state insurance commissioners have already indicated that they believe waivers will be necessary to keep insurers in their markets viable.