More ICD-10 Costs Should Be Allowed To Meet MLR Requirements, Insurers Say

Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.

By Sara Hansard  

Health insurers should be allowed to include more costs incurred in implementing a new claims coding system in order to meet requirements of the health care reform law, the industry said in comments filed Jan. 6.

Only costs incurred in 2012 and 2013 for converting to the International Classification of Diseases, 10th Revision (ICD-10) claims system can be included in the medical loss ratio (MLR), America's Health Insurance Plans and the Blue Cross and Blue Shield Association (BCBSA) said in separate comment letters. The MLR is a major consumer protection provision in the Patient Protection and Affordable Care Act.

The rule does not recognize “the significant costs health plans have incurred and tracked in 2011,” AHIP said in its letter, signed by Daniel Durham, executive vice president of policy and regulatory affairs, and Colleen Gallaher, senior vice president of state policy. AHIP represents about 1,300 insurers covering some 200 million people.

In the final medical loss ratio rule issued in December, the Centers for Medicare & Medicaid Services allowed up to 0.3 percent of premiums for converting to ICD-10 to be considered quality improvement activities in 2012 and 2013 (see previous article). Under HHS regulations issued in 2009, health insurers are required to have ICD-10 in place by Oct. 1, 2013.

Cap Should Be Removed

Although the 0.3 percent ceiling is expected to cover most insurers' conversion costs, the health insurance trade associations also recommended that the cap be removed. “There is no basis for limiting the ICD-10 to expenses for which credit can be taken to 0.3 percent of total premium,” BCBSA said in its letter, signed by Justine Handelman, vice president of legislative and regulatory policy. “Limiting the amount could result in inequitable treatment for issuers who incur all or most of their conversion costs in one year or for smaller issuers whose conversion costs on a percentage basis are higher,” the letter said.

The MLR provision of PPACA requires large group plans to spend at least 85 percent of premiums on medical claims or quality improvements, and individual and small group plans must spend at least 80 percent. Plans that do not meet those thresholds must refund the difference beginning in 2012.

In a Dec. 2 press release, CMS said that, based on estimates from 2010, up to 9 million Americans could receive rebates of between $600 million and $1.4 billion are a result of the MLR provision. But early reports suggest that insurers are lowering premium growth rather than face the prospect of providing rebates, CMS said.

No Notices to People Not Receiving Rebates

The two health insurance trade associations opposed a proposal in the final rule that MLR notices be sent to policyholders not receiving rebates. “This notice requirement ultimately would result in an increase in costs for health care coverage, while being of little value to the vast majority of consumers and, in fact, will likely result in increased confusion,” said BCBSA, which represents 38 Blue Cross and Blue Shield companies covering 99 million people.

BCBSA estimated that, based on 2010 data, the incremental cost of mailing notices to subscribers whose issuer met the MLR requirement could total more than $27 million annually.

The final rule, which did not allow fraud prevention and detection costs to be included as quality improvements unless they resulted in money recovered, was “a missed opportunity,” AHIP said. The final rule allows only recoveries from fraud programs to be counted toward the MLR, it said. “Health plan anti-fraud initiatives are strongly focused on preventing fraud before it takes place, rather than ‘paying and chasing’ after the fact,” it said.

AHIP called for CMS to revise the rule to allow fraud detection expenses to be counted as quality improvements.

‘Mini-Med’ Plans Should Spend More on Claims

A comment letter from organizations representing health care consumers and unions said that, although “for some consumers these types of policies may be all they can afford until 2014,” limited benefit, or “mini-med” plans that have annual limits of $250,000 or less, should be required to spend more on medical claims or quality improvements than the final rule would require.

To allow for a transition period for limited benefit, or mini-med plans that have annual limits of $250,000 or less, the plans were initially allowed to double the amount of claims and quality improvement activities they pay for in calculating their MLR. In the final rule, the “multiplier” was adjusted to 1.75 in 2012, 1.5 in 2013, and 1.25 in 2014; in 2015, plans may not limit annual benefits. The major reforms of PPACA, including the establishment of health insurance exchange markets where consumers can buy plans that cover a wide range of benefits, take effect in 2014.

The groups, which included the American Heart Association, the American Cancer Society Cancer Action Network, the American Federation of State, County and Municipal Employees, the Service Employees International Union, Consumers Union, Families USA, and Health Care for America Now, said the multiplier should be reduced to 1.5 for large group and small group policies in 2012. The groups also questioned whether it would be possible to move to 1.5 for limited benefit plans in the individual market.

It is “difficult to assess” whether the multipliers adopted in the final rule “are set at the appropriate level—or even whether they are necessary at all,” without data from limited benefit issuers, the letter said. The groups urged HHS to make the data available as soon as possible.

On Jan. 6, the Center for Consumer Information and Insurance Oversight posted a listing of 1,231 limited benefit plans that have received waivers from PPACA‘s MLR requirements. The plans receiving the waivers cover 3.9 million enrollees. In addition, 491 health reimbursement arrangement accounts covering about 130,000 people have received waivers, CCIIO said in its posting.

For More Information

America's Health Insurance Plans' comments are available at The Blue Cross and Blue Shield Association's comments are at The Center for Consumer Information and Insurance Oversight's list of limited benefit plans that have received waivers from the medical loss ratio rule is available at The comment letter from consumer and employee groups is available at


Request Health Care on Bloomberg Law