Health insurers and the people who speak for consumers in proceedings at the National Association of Insurance Commissioners (NAIC) are clashing in discussions about medical loss ratio (MLR) computations.
The Patient Protection and Affordable Care Act of 2010 (PPACA) now requires insurers to spend at least 80 percent of individual and small group revenue and 85 percent of large group revenue on health care and quality improvement efforts or else provide rebates.
Shari Westerfield, a senior actuary with the Blues, said that PPACA itself does not distinguish between the value provided to policyholders through medical expense payments and through rebate payments, and that precedent is on the insurers’ side.
“The NAIC previously recognized that the MLR rebates provide the same value to policyholders as experience-rating refunds and prescribed the same accounting treatment for the rebates as for other experience-rating refunds,” Westerfield wrote. “For purposes of the MLR calculation, the NAIC determined that experience-rating refunds should be included in the numerator of the MLR.”
That means insurers should include MLR rebate expenses with claims expenses in the MLR formula, Westerfield said.