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NAIC Approves MLR Form, Completes Busy Seattle Meeting

The National Association of Insurance Commissioners has approved the blank form to be sent out to health insurers to assess their medical loss ratios -- a task assigned to the NAIC by the health reform law, which now demands minimum company loss ratios.

The MLR blank -- this one specifically focused on 2010 figures -- will be forwarded to the U.S. Department of Health and Human Services for final certification. Its passage marked the major achievement of the NAIC's summer meeting in Seattle, though a number of other issues moved forward, too.

The federal health reforms require that large-group plans spend at least 85% of premiums on medical costs and that small-group and individual plans spend at least 80%. The requirement is already active for this year, and this blank -- scheduled with a filing deadline of April 1, 2011 -- will examine current performance.

The MLR form includes such categories as "incurred medical incentive pools and bonuses," "deductible fraud and abuse detection/recovery expenses" and "improving health care quality expenses incurred."

Under the reforms, companies that don't meet the minimums will have to send rebates to customers. However, it's not the 2010 year that starts the mandatory rebate, so the commissioners said this will act as a kind of test version that could be modified when going into 2011 -- the first year in which insurance companies will be subject to rebates.

Oklahoma Commissioner Kim Holland, secretary-treasurer of the NAIC, said the group took a "very, very deliberate and prudent approach" to this initial MLR decision, which she said clears the way for future efforts "defining more extensively what will go into the medical loss ratio."

America's Health Insurance Plans had asked for a number of other components to be included in the medical cost category. "The current proposal could have the unintended consequence of turning back the clock on efforts to improve patient safety, enhance the quality of care, and fight fraud," said Karen Ignagni, AHIP's president and chief executive officer, in a statement. "Preserving patients' access to high-quality health care services is essential if the key goals of health care reform are to be achieved."

Connecticut Commissioner Thomas Sullivan voted in favor of the proposal, which he called "a valiant effort to define that which Congress failed to define." But he had reservations about the health reforms and the MLR restrictions, which he said "could have a deleterious effect on an otherwise competitive market. … I remain deeply concerned with the future of the health insurance marketplace in my state and nationally."

Illinois insurance Director Michael McRaith argued during the discussion of the executive and plenary committees, that health insurance must be treated differently than other insurance sectors. "We can choose our car," he said. "We can choose our home. But we don't choose to get cancer."

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After the vote, which cleared the MLR blank without opposition, West Virginia Commissioner Jane Cline, NAIC president, said, "That was critical." But she pointed out that even though the summer meeting had been largely focused on new federal demands, the usual work had gone on, too. "There has been a significant amount of work on the NAIC plate."

NAIC's CEO Therese "Terri" Vaughan said solvency modernization was a "key area" of work at this meeting. The Solvency Modernization Initiative Task Force released its updated "roadmap." The updated work is the result of task force research on solvency structures around the world and includes short-term and long-term plans for using that knowledge.

The meeting also saw the first session of the working group looking into controversies surrounding retained-asset accounts in life insurance. And the property/casualty committee ran through several issues: taking some steps toward developing a model law for regulating credit-scoring vendors while also discussing a pending data call to examine how insurers use the scores; discussing the consumer guide for auto insurance, a draft of which is scheduled for consideration at the fall meeting; and adopting a request to revise the Model Risk Retention Act.

The meeting was attended by 1,759 people -- including 687 from state regulatory offices and 857 paying participants -- according to NAIC staff.

Though an originally scheduled visit to the meeting by President Barack Obama was later cancelled, the health reform aspects of the meeting did draw sidewalk protesters.

"We're here to basically encourage the insurance commissioners to resist the lobbying of the health corporation lobbies, which we believe is basically against the interest of the people in terms of health care," said Jim Squire, a Seattle doctor involved with the groups United for Single Payer and Physicians for a National Health Program. Squire, who protested outside the meeting and advocates publicly run health insurance, said the health insurers have been looking to game the new MLR laws. "Now they're scurrying as fast as they can to include all kinds of things that they didn't include before," he said. "The laws have loopholes you could drive a truck through, and they're going to find them."

Go to http://www.ambest.com/media/media.asp?RC=176908 to hear the interview with Holland in its entirety.

(Jesse A. Hamilton, Washington bureau manager: Jesse.Hamilton@ambest.com)



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