The National Association of Insurance Commissioners (NAIC) voted yesterday to adopt model regulations (pdf) that contain definitions and methodologies for calculating medical loss ratios (MLRs) and enrollee rebates for the 2011 through 2013 plan years, as required by the Affordable Care Act. The health care bill mandates that health insurers, depending on the size of the insurance market, spend between 80 and 85% of premium revenue on reimbursement for clinical services or activities that improve health care quality, or provide a rebate to their enrollees. As stated in the model regulations, the MLR is the ratio of incurred claims plus any expenses to improve quality – adjusting for certain conditions outlined in the regulation – to the earned premiums less federal and state taxes and licensing or regulatory fees. Much debate has focused on what expenses should qualify as a “quality improvement” costs. The more costs that are categorized as such, the greater the chance an insurer’s MLR will meet the required threshold. The NAIC was charged with establishing by the end of 2010 uniform definitions and standards by which these MLR calculations and rebates should be made. The model MLR regulations were adopted with only minor technical corrections to the draft regulations released last month. The NAIC-approved regulations will now be sent to the U.S. Department of Health and Human Services for certification and/or revision before a final set of regulations is released.

In addition, the NAIC recently sent a letter (pdf) to HHS Secretary Kathleen Sebelius that outlines additional issues it believes the HHS needs to address in implementing a final rule. These issues include the suggestion that enrollee rebate payments be paid to the individual or entity that paid the premiums. Therefore, if the employer collects the premiums and submits them to the carrier, then the employer should be paid the rebate and be required to distribute it to the employees based on their contribution to the premium. The NAIC also recommended that expatriate and international plans be exempt from the medical loss ratio limit and rebate, and suggested that health insurance companies in some markets be provided with a transitional period to comply with the 80 percent MLR limit.

This entry was written by Ilyse Schuman.

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