Tuesday, November 23rd, 2010 - 10:12
Tuesday, November 23, 2010 - 08:44
The Obama administration has released long-awaited rules governing how much insurance companies must spend on patient care instead of administrative expenses.
The Department of Health and Human Services has released medical loss ratio regulations requiring insurance companies, beginning next year, to spend at least 80 percent of their premium dollars on medical care. The Obama administration followed the lead of the National Association of Insurance Commissioners, which presented recommendations, and added a few other stipulations in areas where the NAIC left it up to the feds.
Insurance companies will have to spend 80 percent of their premium dollars on medical care in the small group and individual market, and 85 percent on medical care in the large group market. Starting in 2012, companies that fail to meet these requirements will have to issue refunds to their customers. HHS adopted a fairly strict definition of what constitutes medical care, allowing disease managegement activities to count but not permitting fraud-prevention efforts to be claimed as medical care. Companies will also, for the most part, have to meet the MLR requirements in each state instead of meeting the requirement nationally.
However, HHS did provide two notable caveats to the regulations. First, states can apply for waivers on behalf of insurers in the individual market if they believe that the immediate implementation of the regulations will disrupt the market. Four states have already applied for the waivers, according to The Washington Post.
Second, companies offering so-called "mini-med" plans will get a reprieve for 2011 to spend half as much on care as those regulated by the MLR requirement, according to The Wall Street Journal. These plans, offered by McDonalds and other companies with high employee turnover, provide a minimal level of care and cap their medical expenditures.
Neither of the caveats is surprising. The MLR decision presented the administration with a delicate balancing act between the spirit of health reform and the necessity not to disrupt care before the bulk of reform takes effect in 2014. The last thing the administration wants is for the aggressive implementation of health reform to decrease options for care before there are alternatives for people, specifically the insurance exchanges that states must have running by 2014.
