Washington Health Policy Week in Review
Rockefeller: Insurers Trying to 'Game' Medical Loss Ratio Recommendations

By Jane Norman, CQ HealthBeat Associate Editor

July 21, 2010 -- Democratic Sen. John D. Rockefeller IV has leveled a new salvo at the health insurance industry, writing in a letter that insurers are attempting to "game" the health care law and are pouring "limitless" resources into their lobbying of state insurance commissioners who are developing key recommendations.

"It is clear that health insurance companies are sparing no expense to weaken this new law and the protection it promises to America's consumers," Rockefeller, of West Virginia, wrote Tuesday to Jane L. Cline, president of the National Association of Insurance Commissioners. Cline is the West Virginia insurance commissioner.

While new standards will create short-term problems for some carriers, "I respectfully request that you and your fellow insurance commissioners keep the consumers of your states foremost in your minds," Rockefeller wrote. So far, regulators have "wisely" rejected lobbying efforts, with a couple of exceptions, he wrote.

The NAIC is engaged in the lengthy and difficult process of developing recommendations for standards for the so-called medical loss ratio, or MLR, that's part of the new health care law. Democrats inserted the provision in the law with the intent of steering more insurance company spending toward benefits. The recommendations will be sent on to the Department of Health and Human Services.

Under the MLR, beginning in January, large group plans must spend 85 percent of premiums on clinical services and activities related to quality of care, with just 15 percent devoted to other items like salaries, administrative costs and profits. For small group and individual plans, 80 percent of premiums must be spent on clinical services and quality of care and 20 percent on anything else. Rebates will have to be paid by the companies if the percentages aren't met.

The problem confronting the NAIC, made up of Democratic and Republican appointed and elected officials, has been defining just what are clinical services and activities related to quality of care.

Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said that insurers indeed are closely following NAIC activities but have done nothing improper. Their goal is to see the MLR written in a way that won't disrupt health care coverage that consumers currently have, he said. "If the MLR is too restrictive it could turn back the clock," Zirkelbach said.

Cline, in a statement, defended the state regulators' work. "As one of the driving forces behind health care reform, the NAIC is pleased that Sen. Rockefeller continues to follow the implementation process and we welcome his sustained interest and input," she said. "As the senator's letter indicated, the NAIC has developed and maintains an open and deliberative process for the implementation of health care reform."

Rockefeller said he and his staff members have been closely following the NAIC deliberations because the medical loss ratio is a key consumer protection provision in the law. He said that the NAIC had created a "fair, deliberative process" that's allowed people to share comments and ideas, but insurers also have been "furiously lobbying" the organization to write the definitions in a way that will allow current business practices to continue.

Industry lobbyists, lawyers and consultants "pore over every word" of draft proposals, monitor every teleconference and "swamp" the organization's working groups with comments and proposed revisions, Rockefeller said. Insurers and their allies have submitted 160 comment letters of more than 600 pages while consumer representatives have presented 23, he said.

AHIP's Zirkelbach said insurers are "providing data and information on what health plans are doing" and are interested because of the impact on their business.

But Rockefeller said that insurers have been pushing to "weaken" the concept that "quality improvement" should be confined to expenses that have been proven in an objective way to improve patient care. Instead insurers want money spent processing and paying claims, creating provider networks, updating technology systems and protecting against fraud to be considered quality improvements, he said.

The subgroup looking at this issue did reject those arguments, Rockefeller said. But he objected to one exception allowing insurers to count "fraud and abuse detection" expenditures as medical expenses. An additional problem is that there's no detailed definition of those expenses, he said.

Additionally, Rockefeller said he's unhappy with another subgroup decision, this one to bar the public release of information submitted by insurers to justify their quality improvement expenses. He said he understand insurers' concern about disclosure of proprietary information, but traditionally companies have resisted disclosure of any information.

Zirkelbach said insurance companies believe that efforts now undertaken such as disease management, care coordination for patients with chronic conditions, 24-hour support for those with chronic conditions, health and wellness activities and health information technology should be considered in the "quality of care" category. "The important focus needs to be on what is the impact of the regulation going to be on programs that patients like and rely on today," he said.

Cline said everyone's welcome to express an opinion. "The NAIC encourages Sen. Rockefeller to continue to contribute to our transparent and thoughtful process," she said. "Only through continued collaboration, with input from all interested parties, can we work towards the goal of developing a sound platform for reform."

The commissioners couldn't meet an initial June 1 deadline for their recommendations set by HHS, citing the complexity of their task, but are expected to come up with the MLR language as soon as this month.


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