State Regulators Wary of Insurer Requests on Medical Loss Ratio

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By Sara Hansard

Nov. 20 — Health insurers Nov. 20 asked state insurance regulators to consider including fraud detection activities as quality improvements as well as activities to design new payment models based on value under the Affordable Care Act's medical loss ratio (MLR) requirement, but regulators were wary.

At the National Association of Insurance Commissioners' fall meeting, Colleen Gallaher, senior vice president of state policy for America's Health Insurance Plans, said that “patient safety and quality of care in fraud detection and prevention programs” as well as efforts by insurers to create value-based payment models have been “ignored” in MLR regulations. The regulations, aimed at pushing insurers to operate more efficiently, require insurers to spend at least 80 percent of premiums on claims or quality improvement activities, or to refund the difference to consumers.

Molly White, with the Missouri Department of Insurance, said all types of insurers combat fraud, not just health insurers, and she added, “I have a hard time equating how [combating] fraud improves health quality.” The Centers for Medicare & Medicaid Services Nov. 19 issued a report finding that consumers have received more than $2.4 billion in premium rebates since 2011 under the MLR rule (224 HCDR, 11/20/15).

NAIC Involvement in MLR Rule

The NAIC developed the standards for the medical loss ratio regulation that the Department of Health and Human Services adopted and put into effect in 2011, and the state regulators' group is planning to reconsider what it recommends as qualifying for quality improvement activities. Public comments can be made until Jan. 15.

Insurers had called for including their fraud detection costs in the MLR rule, arguing that not allowing them to include those costs as quality improvements could hurt patient safety and health-care quality if providers prescribed ineffective or harmful treatments.

Jessica Waltman, senior vice president of government affairs for the National Association of Health Underwriters (NAHU), said “it is critical that issuers have the ability to innovate when it comes to quality initiatives, and that quality improvement standards should incent that innovation, not hinder it.” NAHU represents about 100,000 health insurance brokers.

Quality initiatives should encourage value-based designs such as accountable care organizations that have been developed under the ACA, Waltman said.

J.P. Wieske of the Wisconsin insurance department said regulators “need to be a little bit careful with some of this stuff because we want to create an environment where there's incentive for the insurers to tamp down costs.” Value-based designs are “garden-variety stuff, stuff that's been around,” and he asked for specific examples of what insurers are doing to drive down health-care costs.

“This strikes me as, at least fundamentally, a provider contracting issue,” said Brendan Peppard of the New Jersey insurance department. “The trick will be figuring out how to define this in such a way so that you're not putting fundamental provider contracting costs” in quality improvement activity costs.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Janey Cohen at

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