Even as state legislatures tackle how they will create new health care exchanges, the details of federal health care reform affecting their current health insurance markets have states, insurers, and others asking for time. One of the changes required by the Patient Protection and Affordable Care Act (PPACA) addresses Medical Loss Ratio (MLR) requirements on health insurers. Intended to reduce administrative costs and excess profits, states are now asking for waivers from federal law so that they can phase in MLR requirements over the next few years. The states hope that this will allow for changes in policies to prevent insurers leaving their jurisdictions, and to address other issues like insurance agent commissions, prior to exchanges coming on line in 2014.
Prior to the PPACA establishing a federal MLR, states determined how much insurers could spend on expenses not related to health care expenditures. While many states have established MLR requirements, the federal MLR requirements are more stringent than those now in place. Federal MLR requirements limit the amount of administrative costs and profit that insurers can make to 20% of premiums for individual and small group coverage and 15% for large groups, when state limits allowed 25% or more. Based on claims information that carriers will report in 2011, insurance carriers will be required to issue rebates to customers if they do not spend 80 to 85% of their revenue on health care or quality improvement costs. As costs vary between states due to a variety of factors, insurers may cease to do business in some states rather than pay significant rebates.
Nine states including Florida, Georgia, Iowa, Kentucky, Louisiana, Maine, Nevada, New Hampshire, and North Dakota have formally applied for waivers from the pending requirements so that they can maintain carriers in their health insurance markets. Maine has already been granted a waiver to adjust their MLR standard to 65% and the eight other waivers are still under review. State exchanges will change the way individuals and groups purchase health insurance, but they depend on a healthy market to provide options through the exchange framework.
Tighter MLR requirements and the move to an exchange market have states concerned also about the role of insurance agents and brokers. Under current rules, agent and broker commissions paid by health insurers will be calculated as administrative costs. Carriers are anticipated to move their offerings to online resources and direct sales in response to MLR and in anticipation of exchange implementation. This result is a feature supported by advocacy groups like Health Care for America Now and Consumer Union who believe that strict MLR requirements will reduce costs to consumers.
Industry groups like the National Association of Insurance and Financial Advisors (NAIFA) and The Council of Insurance Agents & Brokers (CIAB) oppose the categorization of commissions in this way, noting that insurance agents are significant employers in many states, act as consumer advocates for their customers, and can reduce consumer protection and oversight burdens in states where administrative agencies are already stretched.
This position has also received support from state insurance commissioners. This issue was a concern last year when the National Association of Insurance Commissioners (NAIC) made rule recommendations to the Health and Human Services Department following contentious discussions of what constituted "administrative" or "quality improvement" costs and how the MLR would be determined. Since that time HHS has issued interim final rules for their implementation based on the input they received from the state insurance commissioners, while the insurance commissioners have directed the NAIC Health Insurance and Managed Care Committee to address the role of the insurance agent in their markets. One possible avenue exists under the PPACA, as the law provides for health care "navigators" that would fill some of the roles currently filled by agents.
Congress too is discussing this issue. House Bill 1206, introduced in March and sponsored by Rep. Mike Rogers (R-MI), would carve agent commissions out of the MLR calculation. While the bill has bi-partisan cosponsorship in the House, Senator Jay Rockefeller (D-WV) has been a strong proponent for a strict exclusion of administrative costs from the MLR computation and this position is also strongly supported by provider groups like the American Medical Association.
Ultimately, states will be seeing considerable changes in their existing health insurance markets leading up to 2014, not only in the way that health insurance is purchased, but in the underlying market that the exchanges will access. While it remains to be seen if states can address all of the details effectively prior to that date, it is clear that Governors and state legislatures will continue to seek flexibility as they address health insurance in their jurisdictions.
By Robert A. Holden, Vice President
Robert A. Holden is a Vice President for Stateside Associates. http://bit.ly/elv6Po
No comments:
Post a Comment