Rules for med­i­cal loss ra­tios

New forms, rules could hurt qual­ity pro­grams

Modern Healthcare - - Front Page - Re­becca Ve­sely

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.”

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