Insurers lose battle as NAIC approves tough MLR rules

The National Association of Insurance Commissioners (NAIC) has unanimously backed tough medical-loss ratio (MLR) rules requiring insurers to direct 80 to 85 percent of their premiums to medical care, rather than corporate salaries and profits, Reuters reports.

"The changes will occur over time and we will adjust and make recommendations to modify it if we see a need," Kansas Insurance Commissioner Sandy Praeger, head of a NAIC working committee, told Politico. "There will be some companies that I think will decide, they have a very small book of business in a state and they'll decide maybe it's not worthwhile to stay in the state."

Costs that would qualify as improving health under the proposal include spending to increase patient safety, investing in health information technology, and preventing medical errors and hospital readmissions. Among those that would not: nurse hotlines that do not deal directly with patient care, efforts to reduce fraud, and insurance brokers' commissions, according to the Washington Post.

"The current MLR proposal will reduce competition, disrupt coverage, and threaten patients' access to health plans' quality improvement services," AHIP President and Chief Executive Karen Ignagni said. "Defining healthcare quality initiatives in a way that is too narrow or static will turn back the clock on progress and create new barriers to investment in the many activities that health plans have implemented to improve healthcare quality."

However, Timothy Jost, a consumer representative to NAIC, countered that the commissioners had granted insurers plenty of leeway. "There's no end to what [insurers] would have wanted to put under 'quality improvement,'" he told the Post. NAIC thoroughly examined the issue and the industry was on every one of the calls and had a great deal of input, he added.

NAIC will send the recommendations next week to the Department of Health and Human Services. Although NAIC's recommendations are not binding, the Post reports that HHS Secretary Kathleen Sebelius is likely to follow them fairly closely. The MLR calculations take effect Jan. 1, 2011.

To learn more:
- read the Reuters story
- check out the Politico article
- see the Washington Post story
- check out the AHIP statement

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