PPACA Work Starts With Discussion of Health Improvement Costs

As state insurance regulators start tackling the medical loss ratio issue in an effort to meet a tight deadline to provide their expertise to federal regulators by a May 14 deadline, one of the questions being raised is what will count as health care improvement costs and will that be included in a medical loss ratio.

The issue will be one of the “big battle grounds,” according to one regulator who offered comment during a recent discussion among regulators of the National Association of Insurance Commissioners, Kansas City, Mo.

Regulators have been asked to respond to over 40 questions posed by the Department of Health and Human Services Secretary Kathleen Sebelius. The questions are part of a mammoth effort to implement the new Patient Protection and Affordable Care Act. The issue of medical loss ratios is one of the first issues that regulators need to address.

As part of that effort several regulators are spearheading the work. The NAIC’s Accident and Health working group is organizing the project under the direction of Steve Ostlund, an Alabama regulator. Julia Philips of Minnesota is handling rate review and Rick Diamond of Maine working on the medical loss ratios.

The new law requires that there be a payout of 80 cents on the dollar. Some states have lower payout requirements but if items like disease management are included, the ratios may meet the new federal requirement.

Lou Felice, a New York regulator, said that how these payments are treated could also impact the medical loss ratio for solvency purposes. If there is a reallocation, he said, it could affect what is considered a claim and what is a quality care payment. New York intends to discuss a reporting form that will pull out what pieces of the medical loss ratio look like, he said. “I don’t know if you can give a standard to HHS without some directorial guidance behind it,” Felice added.

Regulators also briefly discussed the issue of high risk pools. Commissioners are currently talking with HHS and states are required to state their intentions on how they will handle these pools by this Friday, April 30. HHS will issue contracts next week, according to the discussion.