Health insurers should be allowed to put a wide range of activities in the “medical expense” category when computing medical loss ratios, a Buckeye State official says.

Ohio Insurance Director Mary Jo Hudson writes about the definition of “quality improvement activity” in a comment on efforts by panels at the National Association of Insurance Commissioners, Kansas City, Mo., to develop recommendations on implementing the new Affordable Care Act minimum medical loss ratio provisions.

ACA is the legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act.

ACA requires the federal government to set minimum medical loss ratios for individual and small group health insurance.

The Internal Revenue Service, the Employee Benefits Security Administration and the Centers for Medicare and Medicaid Services have put out a request for information about how existing state-based minimum medical loss ratio programs work, and the pros and cons of various strategies for enforcing minimums.

One early controversy surrounded efforts by NAIC officials to decide what activities, such as quality improvement activities, insurers should and should not be able to include in tallies of medical expenses.

Consumer representatives have written to the NAIC to argue that many “quality-related” activities, such as condition management programs, may appear to consumers to be efforts to reduce patients’ access to care rather than efforts to improve the quality of care.

Congress itself has decided to let health insurers include health care quality improvement activities in their medical loss ratio figures, Hudson writes in a comment posted on the NAIC’s website.

The decision to include quality improvement activities in the medical expense category “was an incentive for carriers to move the current, fee-for-service driven health care system to one that invests in performance and outcomes,” Hudson writes.

But the MLR standards also “are an attempt to limit administrative costs associated with providing health insurance coverage,” Hudson writes. “We as regulators must ensure that only verifiable (auditable) expenses for legitimate health care quality improvement activities are included in the MLR calculation.”

When insurers submit their annual financial statements on the “annual statement blanks,” they should report health care quality improvement expenses on a medical loss ratio exhibit, Hudson writes.

To be compatible with U.S. Department of Health and Human Services quality reporting measures, Hudson says the exhibit should include information about expenditures on:

- Effective case management.

- Care coordination.

- Chronic disease management.

- Medication and care compliance initiatives.

- Prevention of hospital readmissions.

- Activities to improve patient safety and reduce medical errors by using best clinical practices.

- Activities to encourage evidence based medicine.

- Health information technology.

- Wellness and health promotion activities.

If HHS officials develop more quality reporting requirements than regulators should create additional categories to provide for those requirements, Hudson writes.

“If an activity proves to be ineffective at improving health care quality, the related expenses should not be included in MLR,” Hudson writes. “Health care quality improvement activities should be allowed if they are in accordance with nationally recognized standards and certification and accrediting bodies.”

Insurers should be able to report the cost of effective wellness and health promotion activities as a quality improvement cost, Hudson writes.