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PPACA: Cost Battle Heats Up

By Allison Bell

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Health insurers and consumer advocacy groups are escalating the war of position papers over the new federal minimum medical loss ratio requirements.

The new Affordable Care Act (ACA), the legislative package that includes the Patient Protection and Affordable Care Act, will require large group plans to spend at least 85% of premium revenue on health care and quality improvement efforts, and individual and small group plans to spend 80% of premiums on health care and quality improvement efforts.

The federal agencies in charge of implementing the ACA minimum medical loss ratio (MLR) provisions could release MLR regulations any day now, PPACA watchers say.

The National Association of Insurance Commissioners (NAIC), Kansas City, Mo., is supposed to help the federal government help the states implement the MLR standards, and the NAIC is going through a model-crafting process of its own.

America’s Health Insurance Plans (AHIP), Washington, today put out a paper listing its 4 goals for the MLR effort.

AHIP says the rules adopted should:

  • Ensure that existing efforts to improve quality are allowed to continue and new initiatives to support the goals of PPACA are not discouraged.
  • Recognize that quality improvement efforts will be advanced by ICD-10 implementation.
  • Include fraud prevention and detection activities in the definition of activities that improve health care quality.
  • Implement a plan for transitioning from the existing state system to the new federal standards to maximize consumer choice.

Health Care for America Now (HCAN), Washington, a group that is highly critical of health insurers, says the 6 largest for-profit health insurers would have had to rebate $1.9 billion to customers in 2009 if the minimum MLR rules and new limits on executive compensation had been in effect that year.

AHIP and the Blue Cross and Blue Shield Association, Chicago, are fighting vigorously to undermine the law, by seeking to “expand the definition of allowable medical expenses to include costs that are not directly related to the delivery of care and have not historically been classified as medical,” HCAN says.

“Insurers have used virtually unlimited resources to hire law firms, lobbyists and consultants to drown the NAIC in paperwork,” HCAN says.

Sen. John Rockefeller IV, chairman of the Senate Commerce, Science and Transportation Committee, has written to NAIC President Jane Cline to express similar views.

The NAIC staff and working group leaders have been creating a fair, deliberative process, but “it is clear that health insurance companies are sparing no expense to weaken this new law,” Rockefeller says. Health insurance companies and their allies have been furiously lobbying the NAIC to write the medical loss ratio definitions in a way that will allow them to continue doing business as they did before the passage of health care reform.”

Health insurance industry lobbyists, lawyers and consultants pore over every word of NAIC draft proposals, monitor every teleconference and swamp NAIC working groups with comments and proposed revisions, Rockefeller says.

“By my count, the health insurance companies and their allies have now submitted almost 160 comment letters — totaling more than 600 pages — to the NAIC regarding implementation of the new medical loss ratio law,” Rockefeller says. Representatives for consumers and businesses have submitted just 23 comment letters, he says.

Insurers would like for the NAIC to count money spent on processing and paying claims, creating and maintaining provider networks, updating information technology systems, fighting fraud, and conducting utilization review of paid claims as quality improvement efforts, Rockefeller says.

These expenditures “do not directly improve the quality of care,” Rockefeller says. Rockefeller says he supports the position of an NAIC subgroup that says health insurers should have to produce objective evidence that expenditures are improving the quality of patient care before they can claim the expenditures as quality improvement expenses.

In related news, Consumer Union, Yonkers, N.Y., has prepared a report suggesting that regulators might be able to reduce the cost of coverage by putting tighter limits on surpluses at nonprofit Blue Cross and Blue Shield plans.

Consumers Union says 7 of 10 of the Blues plans it analyzed had surplus cash equal to 3 times more than the minimum required surplus level. Nonprofit plans with extra cash should set up rate stabilization funds or offer consumers refunds, the organization says.

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