Saturday, November 13, 2010


American businesses spend a lot of time complaining about overregulation, but with the passage of the Affordable Care Act now some eight months in the past, it’s the lack of regulations that is becoming a problem.

The most obvious and urgent area concerns the medical loss ratio provisions of ACA. With just six weeks left before the MLR rules will be imposed on insurers who must decide whether to remain in certain markets, the Secretary of Health and Human Services still has not released final regulations.

It’s not all the fault of HHS. The core definitions and computations of MLRs were entrusted to the National Association of Insurance Commissioners, who initially promised delivery by the end of May, then delayed, and delayed, and delayed, before finally submitting their proposal to HHS in late September. Given the likely impact of the NAIC proposal on some insurers in the individual market (and on their consumers), and the certain Republican response to their problems, it’s not surprising that Secretary Sebelius is hesitating.

HHS has already backpedaled on MLR rules for mini-med policies like those offered to McDonalds’ employees, and supposedly is now trying to craft “special rules” for calculating these plans’ administrative costs for MLR purposes, presumably in an effort to allow them to pass the ACA ratio test. The trouble is, creating special rules for the plans that would otherwise fail the MLR test by the widest margin opens up a major can of worms. Why not have special rules for more generous plans? Why not have special rules for every type of high-deductible plan? How can the dilemma be solved without rejecting the regulatory language that ACA delegated to the NAIC?

Meanwhile in an another part of the insurance swamp, it’s state governments who may be starting to be anxious about the lack of ACA regulations. Those states, like California and Washington, that are moving fastest towards implementation of insurance exchanges, are about to discover that vague and contradictory language in ACA is going to make policymaking hazardous and IT design of dubious value. Without at least having draft regulations, states will find it hard to make critical policy and procedural decisions. Republican state governors may shed few tears over the problem, but unless the GOP succeeds in rolling back reform, even they may prefer to implement their own exchanges rather than yield to federal control—and that means having regulations sooner, not later.

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