Insurance Commissioners Want Congress, HHS to Re-examine Medical Loss Ratio Rule

A year after the Department of Health and Human Services issued regulations setting the percentage of health insurance premiums that must be used to pay medical claims, the National Association of Insurance Commissioners (NAIC) is concerned about the impact of the rule on insurance agents and brokers. The Final rule published last December (Final rule, 75 FR 74864, December 1, 2010) adopted the model language proposed by the NAIC regarding “medical loss ratios” (MLR). The MLR requirements for health insurance issuers were added to the Public Health Service Act (PHSA) by the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) in the hopes of reducing health care coverage costs. 

Under the regulations, health insurers are required to provide annual rebates to enrollees if the MLR does not meet an 85 percent minimum in large group markets (51 or more employees), or an 80 percent minimum in small group (2 to 50 employees) or individual markets. The first rebates are scheduled to be issued in 2012, based on insurers’ MLRs in 2011. 

On November 22, the NAIC, which is made up of state insurance commissioners, adopted a resolution asking Congress to amend Section 2718 of the Public Health Service Act (PHSA) (the statute underlying the MLR regulation) “to preserve consumer access to agents and brokers.” The NAIC noted “growing concern over insurance market disruption caused by the MLR requirements [which] has led many insurance commissioners to request MLR adjustments for their individual markets.” The resolution stated “MLR requirements have had profound detrimental marketplace effects for insurance producers and, more importantly, are adversely affecting the quality of service provided to consumers and the ability of insurance purchasers to access and rely on competent and qualified insurance advisors.”

 The resolution also called on the Department of Health and Human Services to possibly:

  •  (1) approve state MLR adjustment requests;
  • (2) place an immediate hold on implementation and enforcement of the MLR requirements relative to agent and broker compensation; and
  • (3) classify a portion of producer compensation as a health care quality expense for purposes of PHSA sec. 2718.

Stay tuned- tomorrow we will look at two states’ waiver applications for the MLR.