State insurance commissioners moving forward on medical loss ratio

State insurance commissioners are putting the finishing touches on their medical loss ratio forms, an official with their national organization said Monday afternoon.

The form is used by insurance plans to report financial information to insurance regulators. It will help the Department of Health and Human Services calculate how much money insurers will have to reimburse their customers if they don't spend enough of their premium dollars on healthcare. 

The National Association of Insurance Commissioners (NAIC) expects to have the form ready by the end of next week so it can vote on it during its annual summer meeting, Aug. 14-17 in Seattle, said Brian Webb, manager of health policy and legislation for NAIC.

Work continues on final definitions and calculations of the medical loss ratio itself, Webb added, and a final decision isn't expected until later this summer. Under the healthcare reform law, the NAIC is charged with defining the medical loss ratio and HHS must certify the association's work.

Webb, speaking at an Alliance for Health Reform event, said one of the outstanding issues is whether to subtract some or all federal taxes from the premiums when calculating the ratio. Health plans favor the latter approach, because a lower premium denominator works in their favor.

"We're not sure what the definition of federal taxes is — we're still waiting for HHS on that," Webb said. "The law (says) the denominator is all of your premiums minus federal and state taxes. Some would define that as federal premium taxes; some would say ... it's all federal taxes."

Under the healthcare reform law, health plans have to spend a minimum amount of premium dollars (80 percent in the individual and small-group markets, 85 percent in the large-group market) on medical care or quality improvement. Sen. Jay Rockefeller (D-W.Va.), one of the strongest proponents of the medical loss ratio, has raised questions with some of the investments health plans say improve quality, including: claims processing, creating and maintaining provider networks, technological upgrades, fraud prevention and "utilization review" to detect inappropriate payments.

"There have been some inroads into the interpretation, softening the interpretation a little bit," Rockefeller said Monday at the Alliance event. "I don't know if they will stand, I don't know if they're temporary."

In addition to being worried about insurers' influence on the NAIC, Rockefeller also raised concerns that the professional staff at HHS might dilute definitions they don't agree with. The senator pressed the director of the office charged with overseeing healthcare reform about how HHS proposes to deal with entrenched state and federal bureaucrats who might not share the administration's zeal for reform.

But Jay Angoff, the director of HHS's Office of Consumer Information and Insurance Oversight, demurred, simply reiterating that the medical loss ratio provision was "an important issue." A visibly irritated Rockefeller called Angoff's non-response "Shakespearean."

Agreeing on a definition won't be the end of it, Webb added.

"How the rebate will be distributed and how the rebate will be basically paid is a big question," he said. "We're going to have to work together to be reviewing (what the insurers report), making it that public to the extent that we can, so that people can review that information and stay on top of it."

Clarification: This post was updated Tuesday to clarify that the NAIC plans to vote soon on the medical loss ratio form but not its definition.