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Insurance Commissioners Ship Medical Payout Recommendations to HHS

By Jane Norman, CQ HealthBeat Associate Editor

October 28, 2010 -- The National Association of Insurance Commissioners on Wednesday formally sent to the Department of Health and Human Services its recommendations on a key rule establishing minimum medical payouts.

The recommendations, arrived at by commissioners last week following months of intense negotiations and debate, rejected pleas by insurance companies for greater flexibility in implementing new national medical loss ratio (MLR) rules.

Under the rules, policies sold to individuals and small groups must pay out at least 80 percent of premiums for medical care and quality improvements. For policies sold to larger groups, the minimum is 85 percent. Insurers must issue rebates to policyholders if plans don't meet those requirements.

The commissioners said in their transmittal letter that their decision was unanimous but "we continue to have concerns about the potential for unintended consequences" in the implementation of the rules. Consumers won't benefit if the result is destabilization of the health insurance market and less consumer choice, they said.

This is of "particular concern" in the period before 2014 because many people won't yet have improved access to insurance and might not be able to find other affordable insurance, they said. In 2014, insurance plans will have to accept applicants with pre-existing conditions and individuals will receive subsidies to take part in exchanges in which they will purchase health insurance.

The commissioners asked that Health and Human Services Secretary Kathleen Sebelius "give deference to the analysis and recommendations of state regulators" in markets that might be destabilized. They also repeated their promise to form a working group to examine the role of insurance agents under the new rules. Agents are concerned that their incomes will be cut because their expenses are considered administrative spending under the new rules, not medical.

Consumer representatives to the insurance commissioners' group sent their own letter to Sebelius urging that HHS adopt the recommendations "without significant changes." They also said that while insurance agents and brokers provide a "useful" function, there is no special designation of their commissions in the law and so the commissions should be treated like any other administrative expense.

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