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Life Health > Health Insurance

Agents Fret Over Loss Ratios, Mini-Med Survival

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How broadly federal health regulators define medical loss in upcoming regulations fleshing out healthcare reform legislation has emerged as a key pocketbook issue for insurance agents.

In recent comment letters to the Department of Health and Human Services, agent trade groups are urging the agency not to define a medical loss too rigidly in rules governing the acceptable levels of administrative costs in health insurance premiums.

Another emerging issue is the survival of limited benefit or so-called mini-med plans.

Millions of these plans are sold annually by insurance companies and by insurance agents, according to industry officials. Mini-med plans are in the limited-benefit health product category and are a cousin to critical illness policies, which pay benefits to insureds affected by certain specified medical conditions.

Under the healthcare reform legislation, health insurers cannot offer limited-benefit plans through state exchanges, and such plans do not qualify as offering “essential benefits.”

Most states exempt limited-benefit health insurance products from conventional major medical plan mandates, and some insurers avoid state benefit mandates entirely by selling mini medical only to employers with more than 50 workers.

According to one industry official, this gives HHS the “regulatory latitude to completely destroy these plans, eliminating them from the marketplace, if they choose to say that the market reforms–no annual or lifetime limits–apply to mini-med plans.”

Joel Kopperud, a director for congressional relations at the Council of Insurance Agents and Brokers, said industry officials, including CIAB staff, are meeting with HHS staff “to underscore the significance of this issue.”

If an exception of some sort is not made to mini-med plans in the forthcoming rule on annual dollar limits, nearly 1.4 million Americans could lose their health insurance until 2014, he said.

“It’s a hard position for the Administration, considering [they are] the same plans they sought to eliminate because of the low coverage limits,” Kopperud said. “I do believe the administration will find the right solution. We’re serving as a resource to their efforts as best we can, and we hope to know more soon.”

Brokers who are members of CIAB are telling the trade group that employers who sponsor these plans are trying to determine if the products are workable until 2014, when the exchanges go into effect, or if they will have a new huge expense Jan. 1, 2011 when most renewals occur, Kopperud said.

“The concept of renewing prior to Sept. 23, when the regulations become effective barring no annual or lifetime limits–is hanging in the balance,” he said.

On medical loss ratios, agents’ group said in a recent joint comment letter to HHS that they are “extremely concerned” that a narrow MLR definition in final regulations “would adversely affect” important health plan activities.

In a comment to National Underwriter, Janet Trautwein, executive vice president and CEO of the National Association of Health Underwriters, said NAHU “strongly believes that health care consumers will best be served by a definition of clinical services and activities that improve health care quality which is comprehensive and inclusive.”

It needs to be comprehensive and inclusive, she said, “so that it adequately accounts for the wide spectrum and types of insurer activities that contribute to better health outcomes and health care delivery and provides a level playing field among different types of insurers and products.”

Others signing onto the comment letter included the Independent Insurance Agents and Brokers of America; the Council of Insurance Agents and Brokers; and the National Association of Insurance and Financial Advisers.

The comment letter was submitted in response to a request by HHS for input on how medical loss should be defined in regulations scheduled to go into effect in January as part of the new healthcare reform law.

The provision in the law, the Patient Protection and Affordable Care Act, will require health insurance health plans offering individual or group coverage to submit to HHS an annual report “concerning the ratio of the incurred loss (or incurred claims) plus the loss adjustment expense (or change in contract reserves) to earned premiums.”

In their letter, the four agent trade groups said that a narrow MLR could adversely affect spending on important health plan activities such as case management, wellness, disease management and fraud and abuse prevention programs.

These aspects of medical care and health plan coverage were given “heightened emphasis” by Congress in the health reform law because they both improve care quality and also help contain medical treatment costs, the letter stated.

“If they are somehow diminished due to narrow MLR definitions and enforcement, the quality of care delivery for consumers will deteriorate and health care costs will surely increase,” the letter said.

The letter also asked HHS to consider NAIC accounting rules dealing with medical loss when defining MLR in the new regulations, but widen them based on congressional intent.

The NAIC standard accounting standard related to MLR, the letter said, defines “medical loss” as the value of medical claims an insurer actually paid (“incurred claims”), plus the amount of money the insurer sets aside to pay future claims (“contract reserves.”) But the new law “takes a broader view of MLRs,” the letter said.

The new federal rules require carriers offering group or individual health insurance coverage to report publically the percentage of total premium revenue that they spend on clinical services to health plan enrollees; for activities that improve health care quality; and other costs.


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