Un­ac­cept­able losses

Crit­ics hit lack of fraud credit in MLR regs

Modern Healthcare - - THE WEEK IN HEALTHCARE - Rich Daly

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.

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