Medical-loss ratios: Rockefeller jumps into fray; insurers could abandon markets

Sen. Jay Rockefeller (D-W.Va.), chairman of the U.S. Senate Committee on Commerce, Science and Transportation, has warned U.S. Department of Health and Human Secretary Kathleen Sebelius and National Association of Insurance Commissioners Chair Jane Cline not to let health insurers "defeat the purpose" of the medical-loss ratio provision of the health reform law by "invent[ing] ways to 'game' the minimum medical-loss ratio requirements without changing their actual business practices," reports Politico.

Via letter, Rockefeller presents a case for aggregating medical-loss ratio information "at a level that will be useful for consumers shopping for individual or group coverage in a specific market." Companywide medical-loss ratios have "little or no value" to consumers because these ratios "vary widely by insurance product type and by geographic location." Rockefeller cites the often-maligned Indianapolis-based WellPoint Inc., which reported an overall commercial medical-loss ratio of 82.6 percent for 2009 while experiencing significant variation both between and within market segments. For example, the company's medical-loss ratio for the individual market came in almost 10 percentage points below the overall ratio at 73 percent, and within that market, the ratio was significantly different from state to state (e.g., 62.9 percent in New Hampshire and 95.2 percent in Maine).

Rockefeller also recommends that health insurers be forced "to prove that a particular expense actually improves healthcare quality" before being allowed to count it as a medical expense that affects the medical-loss ratio. To prevent insurers from "cook[ing] the books," the federal government should develop "evidence-based definitions" and require insurers "to consistently apply them to their balance sheets," he suggests. Rockefeller again holds up WellPoint as an example, noting its recent decision to reclassify historically administrative expenses as medical expenses.

Rockefeller is just the latest in a long line of people and organizations that are seeking to influence how medical-loss ratios will be calculated under the health reform law. Effective Jan. 1, 2011, health plans must report their ratios via the Internet. Insurers must maintain a minimum medical-loss ratio of 85 percent in the large-group market and 80 percent in the small-group and individ­ual markets, according to the most recent Health Affairs/Robert Wood Johnson Foundation Health Policy Brief. The federal government has requested comments on medical-loss ratios, with a cut-off deadline of May 14.

A recent Senate report found that Philadelphia-based Cigna Corp., was the only one of six large insurers that would have met the minimum individual-market ratio in 2009, reports Politico. But Florida Insurance Commissioner Kevin McCarty paints an even direr picture, stating that a "huge" number of health insurance products sold in Florida could be driven out of business because they would not meet minimum ratios, according to Health News Florida. "If we don't do something...we won't have an insurance industry at all," says McCarty. "We've got to make sure these companies stay in business so consumers can keep their coverage."

Similarly, Rowen Bell, chair of the medical-loss ratio regulation work group at the American Academy of Actuaries in Washington, D.C., warns that insurers nationwide may begin to leave the individual market if regulators fail to develop a workable transition plan due to concerns about how 2011 rebate requirements could impact companies that don't meet the minimum ratios, reports National Underwriter: Life and Health.

To learn more:
 - read these Politico reports: article 1 or article 2
- read the Rockefeller letter obtained by Politico
- read the request for comment on the medical-loss ratio provision
- read this Health Affairs/Robert Wood Johnson Foundation Health Policy Brief
- read this Health News Florida article
- read this National Underwriter: Life and Health article

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