Individuals and small businesses who buy health insurance can count on their plans spending at least four in five premium dollars on medical care, a key tenet of the health care overhaul signed into law five months ago by President Barack Obama.
The National Association of Insurance Commissioners last week approved a proposed financial disclosure form for insurers known as the “blank” that outlines what health plans can count as medical service. It will go into use next year.
And though the association’s recommendations for a “medical loss ratio” will used by Health and Human Services Secretary Kathleen Sebelius to implement the regulations this year, there is controversy over what is not considered a medical cost.
Ferreting out fraud and abuse, for example, which the insurance industry wants included as a medical expense rather than as an administrative cost.
“Fraud and abuse has a direct impact on the quality and safety of patient care,” said Robert Zirkelbach, spokesman for America’s Health Insurance Plans, lobby for large health insurance companies like UnitedHealth Group, Humana Inc. and Health Care Service Corp., parent of Blue Cross and Blue Shield plans in Illinois, Texas, New Mexico and Oklahoma.
Zirkelbach said health plans hope insurance commissioners will include fraud and abuse expenses when they make recommendations to Sebelius on the “actuarial process” health plans will use under the health overhaul law.
Medical costs figured into the ratio include expenses for physician and hospital care as well as costs related to quality such as a 24-hour nurse call line “that is used to manage a chronic condition,” said Kansas Insurance Commissioner Sandy Praeger, who heads the association’s health insurance and managed care committee.
Under the plan, eighty percent of enrollee premiums will have to go toward medical costs on individual and small group policies, those sold to businesses with 50 or fewer workers. Policies for larger groups — employers with 51 employees or more — will have to spend at least 85 percent of subscriber premiums on health costs.
Health plans that do not meet these percentages will have to pay a rebate to subscribers.
“Medical loss ratios are important because they demonstrate to the employer or family that premium dollars are being used on health care,” said Illinois Insurance Director Michael McRaith, a leader in the association.
The regulations affect state-regulated health plans. Such plans will be the primary choice uninsured Americans will to turn to once states have exchanges up and running by 2014.
In the meantime, insurance plans will begin providing information on what their medical-loss ratios are next spring based on 2010 financial data. Rebates, however, will not have to be paid until after 2011 financial information is submitted in the spring of 2012, the association said.
