Rules for medical loss ratios
New forms, rules could hurt quality programs
There’s something for everyone to dislike in the initial rules issued last week by state insurance commissioners on how health plans will be able to spend member premium dollars starting next year.
The National Association of Insurance Commissioners unanimously approved the financial forms that insurers will have to fill out and submit to state regulators on their medical loss ratios. This form—called a “blanks”—outlines which expenses can qualify as part of insurers’ medical loss ratios, and which must be counted as administrative costs.
Now, provider groups and insurers worry that successful quality programs could lose funding because of the new rules.
“It’s a mixed bag,” said Ellen Pryga, director of policy development at the American Hospital Association. “But I think they have a very good starting framework.”
The document, approved at the NAIC’s national meeting in Seattle, was eagerly anticipated by not only insurers but also by providers, regulators and consumer groups. It relates to a key provision in the Patient Protection and Affordable Care Act that requires insurers to spend the vast majority of member premium dollars on direct medical care. Starting in 2011, insurers are required to spend at least 85% of subscriber premiums on medical costs in large group coverage plans, and at least 80% for individual and small group plans. If they fall short of these medical loss ratios, they must give customers a rebate for the difference starting in 2012.
While full regulations on this issue aren’t expected until this fall, the blanks document does offer guidance on which programs insurers can count toward the ratio.
Qualifying quality-improvement activities, according to the blanks document, must improve health outcomes; prevent hospital readmissions; improve patient safety and reduce medical errors; increase wellness; and enhance the use of healthcare data.
The NAIC has a long list of programs that count under these categories. They include: case management and care coordination; discharge planning; wellness assessments and coaching programs; health education campaigns; some member call lines; and health information technology that improves quality.
While some programs that insurers lobbied for were included here—such as patient appointment call lines— insurers were not altogether happy with the results. In an 11-page letter to the NAIC, Karen Ignagni, president and CEO of America’s Health Insurance Plans, expressed disappointment that activities such as fraud prevention and detection and costs associated with the upcoming ICD-10 coding switch were excluded. AHIP also wanted costs associated with administrative simplification and related health IT expenses to be included.
Instead, starting next year insurers will have to count these programs as administrative costs.
Jeff Micklos, executive vice president and general counsel for the Federation of American Hospitals, said the federation is glad that these costs were excluded in the calculation. But some of the activities allowed, such as health fairs and call lines, are often insurance marketing schemes and should be excluded, Micklos said.
Pryga says that by and large, the NAIC “weighted toward the consumer perspective” in the blanks document. “I would not characterize it as the NAIC caving to insurers,” she said.
But the AHA worries that some effective quality programs could go dark under these rules.
One highly regarded quality-improvement program in Michigan may not pass this test, Pryga said. The Michigan Health & Hospital Association, in partnership with Blue Cross and Blue Shield of Michigan, since 2005 has drastically reduced rates of central line infections in 100 participating intensive-are units.
The insurer may not be able to count this program as quality-improvement activity because expenses must be directed toward individual enrollees and funding was conducted through the hospital association, not individual hospitals, Pryga said.
Pryga: “I think they have a very good starting framework.”