Critics hit lack of fraud credit in MLR regs
The final regulations that implement a federal medical-loss-ratio standard for health insurers generally drew praise from insurers and provider advocates, but critics warned about some of the unintended consequences of mandating how much premium revenue insurers must spend on direct patient care.
The creation of a first-ever federal medical-loss ratio-standard, which was required by the Patient Protection and Affordable Care Act, is intended to reduce spending by insurers on non-healthcare items. Supporters of setting a standard, including the Obama administration, said insurers’ spending on business expenses such as administrative costs, employee salaries and dividends to shareholders were large drivers behind insurance costs rising faster than general inflation in recent years.
The final medical-loss-ratio regulations will require new individual and small groupmarket insurance plans to spend 80% of premium dollars on medical care and healthcare quality improvement, with the remainder allowed for administrative costs. The medical-loss ratio for large group-market plans is 85%. The regulations and standards require insurers to begin reporting 2011 medical-loss-ratio data in June 2012. Insurance companies that fail to meet the standards must provide the difference in rebates to their customers, beginning in August 2012.
In determining the final regulations, HHS rejected some insurer-requested changes but accepted some others regarding what counts as healthcare costs and what counts as administrative costs. For example, the regulations recognized some of the costs associated with modernizing the medical claims coding system “as activities that improve healthcare quality.” But regulators refused to include either insurers’ anti-fraud efforts or all costs associated with implementing ICD-10 codes on the health expenditures side of the medical-loss-ratio equation.