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PPACA: Democrats Expound on MLR Definition

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WASHINGTON BUREAU — The new minimum medical loss ratio (MLR) rules could be a little looser than some insurers had feared.

Senior Democrats in Congress are arguing that, when they wrote the minimum MLR section of the Patient Protection and Affordable Care Act (PPACA), they meant to put tight limits on the kinds of tax payments that insurers can subtract from “total premium” revenue.

But Beth Mantz-Steindecker, an analyst at Washington Analysis, Washington, and lawyers at O’Melveny & Myers L.L.P., a firm that is working with America’s Health Insurance Plans (AHIP), Washington, are predicting that Democratic leaders will have a tough time getting state and federal regulators to implement PPACA the way the Democratic leaders wish they had written the act, rather than how they actually wrote it.

State insurance regulators are creating the minimum MLR implementation rules, and the U.S. Department of Health and Human Services must approve the rules.

“Well-settled principles of statutory construction and longstanding Supreme Court precedent establish that the post-enactment interpretive opinions of several members of Congress cannot alter the meaning of an otherwise unambiguous statutory provision,” O’Melveny lawyers write in a legal letter written at the request of AHIP.

The Democratic leaders’ letter reflects “buyers’ remorse” about the minimum MLR provision and has no legal weight, Mantz-Steindecker says.

The final minimum MLR rules could hurt small insurers and regional insurers that serve the small group and individual markets, but large insurers should do well, Mantz-Steindecker says.

PPACA, part of the federal Affordable Care Act package, will require the MLR, or percentage of health coverage premium revenue spent on health care and quality improvement efforts, to be at least 80% for individual and small group health coverage and 85% for large group coverage.

Democratic leaders have written to state and federal regulators to discuss a provision in PPACA Section 2718 that deals with the health insurer premium revenue figure used in MLR calculations.

The provision defines the MLR total premium figure as “excluding federal and state taxes and regulatory fees.”

In the context of Section 2718, “federal taxes and fees” is “meant to refer only

to federal taxes and fees that relate specifically to revenue derived from the provision of health insurance coverage that were included in the” law, Democratic leaders write.

Democratic leaders say insurers can subtract only the new tax payments associated with PPACA provisions, such as the excise tax that is set to be imposed on high-value “Cadillac plans” starting in 2018, from the MLR premium total.

Revenue used to make normal federal and state tax payments, including state premium tax payments, should be included in the premium total, Democratic leaders say.

The letter was signed by Sens. Max Baucus, D-Mont., chairman of the Senate Finance Committee; Tom Harkin, D-Iowa, chairman of the Senate Health, Education, Labor and Pensions Committee; and Christopher Dodd, D-Conn., chairman of the Senate Banking, Housing and Urban Affairs Committee.

The letter also was signed by Reps. Sander Levin, D-Mich., chairman of the House Ways and Means Committee; Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee; and George Miller, chairman of the House Education and Labor Committee.


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