MLR REGS PROCESS: LOBBYING, LOBBYING, AND MORE LOBBYING—AND SLIDING

Recent stories in the New York Times and CQ give some clues about the insurance industry’s efforts to soften the medical loss ratio rules required by PPACA, with estimates of close to 200 comment letters already submitted to the National Association of Insurance Commissioners working groups preparing the draft regulations for HHS.

Insurers are fearful of the PPACA language that would require rebates to enrollees from plans whose MLR falls below 85 percent for large groups and 80 percent for small groups and individual plans, effective January 2011—and with states having the latitude to increase these ratios.

PPACA requires the new regulations to be in place by the end of 2010, but NAIC had hoped to provide their draft to HHS by the end of May. That date continues to slide, first to the end of July, most recently to mid-August, and with individual insurance commissioners (an eclectic mix of elected and appointed Democrats and Republicans) suggesting publication could be later still.

None of this should be surprising. A rigid interpretation of the PPACA language—including in the numerator only medical expenses, reinsurance, and “quality improvement”—could mean the end of many insurance plans. Accordingly, insurance lobbyists have been pressing for the definition of quality improvement to cover not only disease management, care coordination for patients with chronic conditions, 24-hour support for those with chronic conditions, and health and wellness activities, but also claims processing, IT, network development, and fraud detection. So far, given NAIC’s unwillingness to be characterized as a health plan killer, it looks as if all but the last three may be included, and even, possibly, some aspects of fraud detection.

A second set of issues revolves around the definition of a health plan. For example, will an insurer be able to segregate high administrative expense groups into separate “plans,” in order to insulate other business from the possibility of rebates? Complicating the entire process is the PPACA requirement that NAIC consider the “special circumstances of smaller plans, different types of plans, and newer plans.”

Meanwhile, aside from the lobbyists, NAIC is facing political pressures from liberal Democrats eager to see insurers forced to trim their expenses—and profits.

Finally, whatever NAIC recommends, the lobbyists will have an opportunity to continue their efforts in the individual market area next year, trying to take advantage of a PPACA clause that allows HHS to adjust the 80 percent target downward for a state if “the application of the 80 percent minimum standard may destabilize the individual market.”

Pity the elected NAIC commissioners who must go back to their states and justify the final regs.