The National Association of Insurance Commissioners’ (NAIC) Life and Health Actuarial Subgroup released its initial draft of their model regulation on medical loss ratios yesterday. The model details how the MLR rebates will be paid to consumers if insurers don’t meet the 80% standard in the individual and small group market and 85% standard for large groups. The model is open for comments until October 4, and we expect changes and amendments as it moves through the NAIC’ s extensive committee process over the next few weeks. The goal is final passage during their October 16-21 meeting in Orlando, FL.
While the regulation does exclude all state and federal taxes from the calculation, despite the wishes of some Democratic members of Congress, it also contains some points of concern. First, carriers are not permitted to consolidate their business for the purposes of the MLR calculation—different product lines have to be calculated separately. Also, as expected, fraud protection and utilization review activities are not counted as medical expenses. The regulation does not address a potential pass-through for the calculation of agent commissions, and if that is to be included, it will be part of the instructions for the MLR blanks form.
Thirty-four of the nation’s insurance commissioners met with Secretary Sebelius and President Obama this week at the White House. During the meeting, they indicated their concern about PPACA’s MLR guidelines, as written, stating they could be very problematic for small insurers, potentially causing individual and small group market competition to suffer in many states. The commissioners urged HHS to allow some state markets to phase-in medical loss ratio requirements, allowing insurers to gradually build up to spending 80 percent of subscriber premiums on medical costs over coming years. “If our goal is to minimize disruption before guaranteed issue in 2014, then a way to do that is to do some kind of phase-in,” Florida Insurance Commissioner Kevin McCarty said at the meeting.