Medical Loss Ratio Debate Rages

Discussion about the portion of the health care reform law that requires health insures to maintain a medical loss ratio (MLR) of 80% for individual and small-group products (and 85% for large) is heating up, as critics ratchet up their rhetoric. The debate centers on how insurers may already be responding to the law’s mandate, effective January 1, which require insurers not meeting the MLR minimums to rebate their customers.

The political watchdog group Health Care for America Now has been particularly vocal. A blog written by HCAN’s Executive Director Ethan Rome, describes a report issued by HCAN, Sen. Al Franken (D-Minn.) and Rep. Bill Pascrell Jr. (D-N.J.) along with members of the Main Street Alliance, a network of state-based small businesses that “shines a light on the accounting tricks the insurance companies want to play to game the medical-loss ratio system, and it exposes their lobbying offensive to protect the status quo and undermine this part of the law before it even takes effect.”

The rules regarding exactly how MLR will be calculated have not yet been released, however, and will be published after the administration receives recommendations from industry associations, The National Association of Insurance Commissioners (NAIC) and other health care insurance stakeholders. The NAIC reports it will provide final recommendations for the regulations later this summer.

Ahead of this recommendation, notes the HCAN blog, Sen. John D. Rockefeller (D-W.Va.) reportedly has sent a letter to NAIC President Jane Cline commending the NAIC’s work in the matter, yet cautioning that the insurance industry is "sparing no expense to weaken this new law and the protection it promises to America's consumers."

According to AIS Health.com, which reprinted an article that appeared in Health Plan Week,  some insurers have decided to scale back or exit the individual markets where the MLR mandates are not practical for them in which to compete. AIS Health.com offers Illinois-based Guarantee Trust Life Insurance Co. as an example of a company that chose to discontinue and replace coverage for 1,907 of its 2,100 members covered by an individual policy.  “The affected individual insurance members will be moved into products that have more enrollees and better experience so that it will be easer to meet the MLR ratios,” notes the report. 

Adding further fuel to the controversy is the possible restructuring of how insurers pay brokers and agents. “Some health plans are beginning to restructure the way they pay their brokers and agents in an effort to reduce the percentage of premium dollars that go toward commissions,” AIS Health.com reports.

“They [insurers] want to continue their long-time practice of spending low percentages of premium revenue on actual medical care in certain states and for certain customers,” notes Rome in his HCAN blog.

Even the term “medical care” is fodder for debate. “They want to change the definition of "medical care" to include things that aren't medical care and that have never been considered as such,” notes Rome in his blog. “And the insurance companies are shameless in just how far they will go. They really are trying to have "underwriting," the process by which sick people are weeded out of eligibility for coverage, defined as a medical expense! Along with claims processing, call centers and other expenses that aren't about the actual delivery of care.”

In response, America's Health Insurance Plans’ spokesman Robert Zirkelbach told INN that, “This is a desperate attempt to distract attention away from the fact that these regulations could put at risk important services and benefits that improve the quality of care for millions of patients.”