Insurers, lawmakers and state insurance regulators continue to debate what may and may not be included in a calculation of the medical loss ratio, which requires insurers to spend at least 80 percent of health insurance premiums on medical care or pay rebates to consumers. Separately, debate is also ongoing over how much power individual states have to enforce provisions of the health care law.
Listen to the audio version (.mp3)
JACKIE JUDD: Good day. I am Jackie Judd with Health on the Hill. Senators and Congressmen are back at home for their summer recess, but federal and state regulators are busy burrowing in on how to implement certain elements of Congress’ Health Reform Law. Here to discuss some of the issues in play are Mary Agnes Carey, senior correspondent for Kaiser Health News, and Drew Armstrong of Bloomberg News. Welcome to you both.
Drew, let’s first start with something called MLR, medical loss ratio, which refers to the amount of premiums collected by an insurer. What percentage needs to be devoted to spending on actual health care? What is the fight about at this moment?
DREW ARMSTRONG: We are at the point in the health care implementation process where obviously everything is starting to get really technical and we are pretty deep in the weeds on this stuff, so we have got this thing called MLR. The idea of congressional intent was that you wanted to make sure that when you paid your premium to the insurance company, you were getting back a certain amount of that in actual medical care that was helping you. It wasn’t going to insurer profits or having them run the administration side.
JACKIE JUDD: Advertising.
DREW ARMSTRONG: Exactly. They wanted to make sure you are getting your money’s worth and that is what the Democrats big promise was in this. So, right now the idea is to figure out how to write all the little rules to make sure what counts as medical care, you know, what helps improve care, improve quality? Of course, everybody has a really different idea about what that is, because if you are an insurer, the more you can consider medical care, the more you can reserve over on the other side for profit.
So, if you say that hey, our nurse call-in center or our wellness program or our care management program that does things like make sure you have pre-approval for some treatments, all that counts as medical care. That takes things in the whole big bucket of dollars, puts them in the medical care bucket, and reserves more on the other side for things like profits, salaries, and other administrative expenses. It makes them easier to run their company.
Now, the big fight right now is you are seeing insurers push very, very hard to get more things in there and you are seeing consumer advocates and some members of Congress push back on the other side. Everybody is trying to make sure that these rules are written exactly the way they want them and they are fighting right now through this group called the National Association of Insurance Commissioners.
Those are the state regulators who run state insurance oversight and have been charged with writing up the recommendations that the administration is then going to turn into the actual rules that govern all of this.
JACKIE JUDD: And the insurance commissioners are meeting now in Seattle so it is one of the items on their agenda, and one of the disputes is what taxes are included and what are excluded? Mary Agnes, what was the intent of Congress? What did the language prescribe?
MARY AGNES CAREY: Well, according to the committee chairs of several committees that passed that had the hearings and so on and the mark-ups on the health care law, and here we are talking about the Finance Committee in the Senate, the Ways and Means and the Energy and Commerce Committees in the House, they said we actually wanted some federal taxes and fees included in the calculation. They wrote a letter this week to the NAIC to say that.
The insurance industry says now wait a minute, the law is very specific that these things are excluded, not included, and you can’t pick and choose after the fact. Again, as Drew is talking about, a real fight into the weeds, but a very critical fight that could be the subject of litigation.
JACKIE JUDD: And one of the fights, or one of the struggles maybe is the better word, is in the states there is an unevenness about how much the states have the authority to implement certain parts of the law, this mammoth law. What is going on there?
MARY AGNES CAREY: Well, some state legislatures have given their insurance commissioners and other regulatory bodies a lot of power with insurers. Some have not. So, as we see health care implemented, you could also see a lot of battles in state legislatures all over the country, fighting over how the exchanges are set up and regulated, what is an excessive premium? These sorts of items that will be critical to the congressional intent as the law plays out, but again not all states have done the exact same thing in the sense of giving the regulatory bodies a lot of power to do this.
JACKIE JUDD: Just today, the Secretary of Health and Human Services, Kathleen Sebelius, is going to have a conference call to talk about some of the help that the federal government is going to be delivering to the states to help them with some of these implementation issues. What is she expected to say, Drew?
DREW ARMSTRONG: Well, today they are going to be announcing these rate review grants. The idea is that when insurers go ahead and say hey, next year your premium rates are going to go up by 5-percent, then the state is going to come in and say we are going to take a look at that, what is that coming from, we are going to run an actuarial analysis, say, oh are medical costs really going up that much?
The idea is to protect consumers from some sort of what they would deem unreasonable rate increases, which is a term that hasn’t yet been defined in a legal sense, but obviously that power is going to be given to the states to decide on a state by state basis, because that is where a lot of the on-the-ground regulation of insurance lies. That is why the states have a huge amount of the infrastructure that is in place already. They are going to have to build out a lot more.
So, we are going to see states doing things like these new rate review programs. They are going to have to run the exchanges. They need money to do that. A huge amount of this law is really reliant on state based-infrastructure and regulatory power, even though a lot of that is being handed down by the federal government. They are really leaning on the states very hard to get this right.
JACKIE JUDD: And the grants that Sebelius will be announcing today total $46 million.
DREW ARMSTRONG: That is correct.
JACKIE JUDD: Fifty states, that doesn’t seem like very much money. Will we be hearing complaints from the states that there is simply not enough there yet for them to do the job right?
MARY AGNES CAREY: It certainly could be. I mean, this funding question has been there, on the high risk pool for example, would there be enough money, would you get more claims before the money runs out? I think this is another one of those check points, if you will, in implementing health reform where we have to see. For some states, it might be fine. For other states, it might not, and believe me if they think they need more money, I am sure they will come back to Congress and ask for it.
JACKIE JUDD: Right. Thank you very much, both of you, Drew Armstrong, Mary Agnes Carey. I’m Jackie Judd. Thank you for watching. This has been Health on the Hill.