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States and State Advocates Strengthen Rate Review Laws

Wednesday, May 18th, 2011

States Take Steps to Improve Oversight and Consumer Engagement
In the past few months, several states have taken dramatic steps to strengthen their rate review authority, protect consumers, and call out insurers on excessive rate increases. For example, earlier this year, California health insurers announced planned rate increases that would have driven premium costs up as much as 87 percent for some individuals. But in the face of increasing insurer profits, Insurance Commissioner Dave Jones elicited promises from California’s major health insurers that they would decrease and delay implementing proposed rate increases until the state had a chance to evaluate the accuracy of the insurers’ filing. This week, Consumer Watchdog released a report indicating state reviews of insurer rate increases found erroneous math and unsupported actuarial assumptions in rate filings submitted by health insurers. California legislators are moving legislation to give the insurance commissioner explicit authority to disapprove of or reduce proposed premium increases through the state Assembly.

And in New Mexico, the state’s Republican Governor recently signed into law a bill that enhances the state’s rate review authority. The new law includes strong provisions encouraging public participation by establishing a thirty day public comment period on proposed rate increases and requiring insurers to notify policyholders of any possible increase in their premium rate before the increase can be implemented. The statute further gives policyholders the right to request a public hearing on rate increases that the Insurance Superintendent has approved.

Affordable Care Act Mandates Rate Review
The Affordable Care Act requires an annual review of unreasonable health insurance premium increases. Federal regulations, soon to be finalized, outline the process through which the U.S. Department of Health and Human Services (HHS), together with state regulators, will review and evaluate health insurance premium rate increases.

While several states currently have review processes requiring a comprehensive evaluation of proposed rate increases before insurers may charge consumers and businesses more for their premiums, other states are using the new federal rate review requirement to expand consumer protections. In February, HHS announced $200 million worth of federal grant money available to states to help them strengthen their rate review processes and states will finalize their application for this money this summer.

Together with their Insurance Departments, and independently, state consumer health advocates are making tremendous progress toward protecting consumers from unreasonably high insurance premium increase. At the end of this blog post you will find new resources Community Catalyst has developed to assist states in advocating for stronger rate review laws.

State Advocates are Helping to Improve Rate Review Processes
State consumer health advocates all over the country are taking the lead to guide their states toward revising and implementing stronger rate review laws. For example, in Pennsylvania, the PA Health Access Network is developing an online petition that they intend to use to encourage their insurance commissioner to hold public hearings on proposed rate increases, giving consumers and policyholders the opportunity to provide input on rate increases.

Advocates with Illinois’ Campaign for Better Health Care are supporting legislation that would give their insurance commissioner authority to disapprove or reduce proposed premium rate increases. Recent data released by the Illinois Department of Insurance shows that while insurance premium rates have increased 181 percent since 2005 for individuals and families in Illinois, the top five insurers brought in more than $28 billion in profits in 2010 alone.

And in Ohio, advocates at UHCAN Ohio are in the research phase of their campaign to improve the state’s rate review process, enhance transparency and consumer involvement as a means to protect individuals, families, and small businesses from rising health insurance costs. These advocates are in communication with officials at the Ohio Department of Insurance to better understand the current rate review process and gather data about increasing premium rates.

While we provide three examples here of state advocates working to strengthen their states’ rate review laws and two states where reform is on the horizon, many other states are progressing toward stronger, consumer protective rate review processes or currently have robust laws on the books.

Tools for States to Engage in Rate Review Reform
Because most states will continue to oversee health insurance premium rate increases in their markets, Community Catalyst has designed a toolkit to assist state advocates in evaluating their state’s current rate review process and to develop advocacy resources supporting stronger rate review laws. Use the general fact sheet to explain rate review to policymakers and community organizers. The state-specific template is a guide to asking the right questions and gathering the right information and data to demonstrate the critical need for enhanced rate review authority in your state.

– Sarah Blumenthal,  blog contributor

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Wellness Programs: Boon or Bust?

Tuesday, April 5th, 2011

We want Americans to live healthy lives and take good care of themselves. So does John Berry, the director of the U.S. Office of Personnel Management (OPM). As matter of fact, recently, Berry told health insurance companies that participate in the Federal Employees Health Benefits Program (FEHBP) to encourage healthy lifestyles by offering employees “concrete incentives to participate in wellness and prevention activities.” The next day, the OPM published its annual call letter, which outlines the benefits that participating insurance companies are expected to cover. In the letter, the OPM clearly states it expects the insurers wanting to participate in FEHBP to offer programs that promote health and wellness, which improve employee productivity, enhance healthy lifestyles, and lower long-term healthcare costs.”

Wellness programs are not new. For the past two decades, large employers have been experimenting with wellness pilot programs for their employees. Gym discounts and smoking cessation classes are classic wellness incentives. Now, a growing number of employers are offering wellness or health promotion programs. The Affordable Care Act (ACA) allows employers to “reward” employees with lower premiums, up to 30 percent of the cost of employee-only coverage under the plan, with room to up this to 50 percent with the approval of the Secretaries of Health and Human Services, Labor and the Treasury.

Wellness programs work as employee benefits, but also as a cost saving mechanism for employers. How? The theory behind wellness programs is that by maintaining a healthy workforce, the employer enjoys higher productivity and, down the long-run, reduced health care spending.

The cost-savings theory is well-intentioned, and there has been some limited evidence among large employers, such as Pitney Bowes and Johnson & Johnson, that wellness programs do promote some improved health outcomes and lower health care spending.

But most wellness programs are run by large employers with hundreds of employees and low employee turnover rates. In these organizations, employers have the resources to be innovative and can afford to undertake a wellness program, where they may reap benefits in the long run.

Moreover, wellness programs vary widely between employers, and as more are implemented, potential risks are being identified that need to be addressed before programs are expanded.

The most pressing issue is the potential employee discrimination based on data collected through a health risk assessment (HRA). Such data include an individual’s health information, which may be sensitive and which the employee most likely doesn’t want to share with the employer. Recognizing this problem, various federal laws, including the Health Insurance Portability and Accountability Act (HIPAA), the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), ban employers from discriminating against employees based on health factors, which would include information gathered through HRAs.

But how far can an employer go without triggering any of the discrimination laws? Can an employer discriminate against an employee because he has high cholesterol level? Because she smokes? Because he is overweight? The smaller the employer, the more serious the issue. At a smaller business, everyone knows each other, which may cause the employee to worry about revealing one’s health status to the employer.

The second issue is penalties. There are two types of incentives in a wellness program: One that provides rewards, and one that allows avoiding penalties. The latter only works if those who don’t receive the incentives receive penalties. If a program allows premium discounts for those who lose weight or reduce their cholesterol levels to a certain point but increases premiums for those who were unable to do so, that cost-shifting acts as a penalty. Sure, it can be seen that it is the individual’s responsibility to become healthier. However, a person’s health is highly complex and simply judging someone based on a single factor, such as weight or personal habits, is insufficient to impose mechanisms such as cost-shifting and penalties.

Such penalties can also lead to adverse selection, where less healthy employees are forced out of employment due to unaffordable premiums. Also of concern is wellness program participants getting penalized due to inadequate support to ensure their success in getting healthier.

What we do know: ingredients for wellness success
There are a few ingredients that are necessary for a wellness program to succeed. Programs must:

  • – collect baseline health information from the participating employees through completing an HRA.
  • – provide some incentive for the employees to continuously participate in the program. The incentive can be anything from gym discounts and free smoking cessation classes to actual premium discounts. Discounts can be based on simple participation in wellness programs, or on actual health changes, such as losing weight or reducing the cholesterol level compared to the HRA record.
  • – receive strong buy-in and commitment from the employer to sustain programs, because it takes time for positive results to surface while the employer invests money into implementing and maintaining wellness programs.

What is a sufficient wellness program?
Some larger employers who have had wellness programs for decades have some data showing positive results, such as increased employee health status and reduced overall health care costs. But because no wellness program is alike and employers run multiple programs at the same time, there really isn’t enough evidence showing which programs really work and which don’t. Furthermore, there is almost no qualitative or quantitative study that analyzes wellness programs in smaller employer settings. This is a huge issue for employees at smaller businesses who have limited resources. Unlike larger employers, they don’t have the luxury of trying the everything-but-the-kitchen-sink approach.

Promoting the wellbeing of individuals is a wonderful idea, but it must be done correctly so that employees are not discriminated against or penalized for health factors that are sometimes beyond their control. Wellness programs must also be continuously measured both quantitatively and qualitatively so that the participants can learn about the true benefits of the programs, not only for the employers, but for the individual employees.

– Jekkie Kim, Guest Blogger
Legal and Policy Analyst, Health Care for All Massachusetts

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An unexpected win for consumers at NAIC

Monday, March 28th, 2011

There’s been lots of drama at this year’s first meeting of the NAIC (National Association of Insurance Commissioners) in Austin, TX – way more than any of us consumer representatives to the NAIC expected. The good news, as you may have heard by now, is that the NAIC decided to delay a vote to endorse Congressional legislation that would remove broker commissions from the Medical Loss Ratio (MLR). But that outcome seemed like a pipe dream when the NAIC’s consumer representatives first landed in Austin on Thursday night.

Consumer reps had all been told for weeks that nothing was going to happen at this meeting, no votes would be taken, there’d be just a few hearings – that’s all. So when we got word just the day before we arrived that a number of Commissioners were pushing hard to endorse the Rogers bill we were all taken off guard. Even more alarming, we heard from a number of sources that support for the brokers’ position was so strong the vote was almost a “done deal.”

But after intense advocacy by all sides, including from many consumer groups all around the country, the NAIC decided to take another look at the proposal. After all, not only is it likely that the Rogers bill would result in premium increases for consumers, but there’s simply no evidence that consumers or small businesses are suffering from a lack of access to brokers, or whether reductions in broker commissions are actually a result of the MLR. The only state to provide before and after data on MLRs – Colorado – showed that broker commissions were cut from 20 percent to 10 percent of the premium, suggesting they were way above market norms to begin with.

The NAIC’s health committee will now take a few weeks to actually analyze data in the market about broker commissions and the impacts on consumers and small business owners. We think this is the right approach, and applaud NAIC for taking a more thoughtful and deliberative approach.

Addressing broker compensation is not the only thing NAIC was up to this weekend. The meeting kicked off on Friday with a hearing on health insurance Exchanges. The Exchange Working Group heard testimony from Medicaid experts about some of the very challenging issues states are facing to effectively coordinate public programs with the commercial insurance markets, and got demonstrations of Utah and Massachusetts’ web-based health plan finders. Both states have clearly put a lot of work into designing a web interface that is consumer friendly. That said, by emphasizing how easy their process is for employees, Utah’s presentation was slightly misleading. They neglected to mention that enrollees need to undergo health status underwriting before they can access the website, and they glossed over the difficulty many employees have in choosing a plan among more than 100 different product options.

Joel Ario, head of the Exchange division at HHS’ Center for Consumer Information and Insurance Oversight (CCIIO) also testified. He was asked a number of questions about the feds’ plans if a state doesn’t set up its own Exchange. Ario indicated that HHS has been working on a federal fallback plan, but that HHS does not intend to produce a one-size fits all model. And even if they do have to set up a federal Exchange, HHS would have every intention of working with the states to tailor the Exchange to states’ markets and ensure coordination with state-run public programs such as Medicaid and CHIP.

Next up for the Exchange group is to finalize white papers on issues like financing, adverse selection, and Navigators, as well as to issue additional draft white papers on governance and active purchasing. NAIC consumer reps have submitted extensive comments, and will continue to try to shape NAIC’s recommendations on these issues.

Last but not least, NAIC is looking ahead to 2014 and has a task force working to develop a model state law to implement reforms like elimination of pre-existing condition exclusions, the new premium rating rules, and guaranteed issue. They hope to have a model law adopted by the end of this year, which is pretty darn ambitious.

As for the proposed broker bill, we have a short four to six week reprieve before NAIC takes it up again – and consumer advocates will need to continue to make sure their voices are heard during this process.

– Sabrina Corlette, Research Professor at the Health Policy Institute
Georgetown University

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Rate Review: HHS should look to states

Friday, March 11th, 2011

The growth in the cost of health insurance premiums is one of the major drivers of escalating consumer health care costs. During the national reform process, state advocates urged the federal government to strengthen the regulations governing the rate review process, responding to the Department of Health and Human Services’ request for comments.

Nine consumer advocate groups and Community Catalyst partners submitted public comments on the proposed federal rule. The organizations called for enhanced transparency in the rate review process, timely notification of proposed rate increases to policyholders, a robust role for public participation in the rate review process, and stronger evaluation criteria, including prior approval authority, mandatory review by a state or independent actuary, and historical review of rate increases.

Advocates drew on the specific experiences of consumers in their states to explain the importance of strengthening the federal rule. In Texas, for example, the Center for Public Policy Priorities described the difficulty in obtaining a simple “summary table of rate increases over the last year showing the carrier, policy form, and percentage increase only for filings that were not marked confidential, and to date have been unable to obtain that information” (emphasis omitted). Enhanced transparency requirements, including mandatory notification to policyholders on proposed rate increases and public posting of rate increases on state insurance division websites, will empower consumers to advocate for fair and equitable rate increases and discourage insurers from requesting unreasonable and excessive rate increases.

The Colorado Consumer Health Initiative underscored the strength of Colorado’s rate review process, and urged that all states should have a robust statutory review scheme. A recent retroactive review of one Colorado insurer revealed it was charging unreasonable premiums in the individual market to 90,000 individuals. The rate review process resulted in a $20 million credit to the insured for coverage for overcharges during a 10 month period. The outcome of the review in Colorado highlights the need for comprehensive evaluation of proposed rate increases and a process to compensate consumers who have been victims of unreasonable rates.

States will continue to perform the majority of rate filing reviews, so the rate review process they employ will be critical. State advocates are playing a crucial role ensuring that state rate review processes are strong and effective.

– Sarah Blumenthal, Private Insurance Intern

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ACA Protections Go to Campus

Thursday, March 3rd, 2011

Earlier this month, the U.S. Department of Health and Human Services (HHS) released a new proposed rule that takes an important step toward ensuring that students who purchase a health plan through their university or college will be able to benefit from the same basic consumer insurance protections in place for all individual market plans under the Affordable Care Act (ACA). The proposed rule represents an important victory for the more than one million students who are enrolled in these plans because the plans have historically varied widely in terms of both premiums and benefits — creating incredible hardships for some students.

For example, our partners at Young Invincibles have chronicled the stories of real students who have faced serious difficulties while covered by a student health plan including:

  • – A student with a plan that covered a maximum of $500 annually for over-the-counter prescriptions—leaving her without adequate coverage for her Type 1 Diabetes.
  • – A student with a plan that did not cover the amount of chemotherapy and testing her doctor determined was necessary during treatment for a rare form of cancer called Ewing’s Sarcoma—leaving her with $80,000 in medical debt.

For more stories like these collected by Young Invincibles, click here.

Thankfully, the proposed rule would ensure that students across the country have more protections than ever before because the following ACA individual market provisions would apply to student health plans issued after January 2012:

  • – Insurance companies would no longer be allowed to impose lifetime dollar limits on benefits in student health plans.
  • – When student health plan enrollees get sick, insurance companies would no longer be allowed to drop coverage because of an unintentional application error.
  • – Insurance companies would be prohibited from denying or excluding coverage for students under age 19 because of a pre-existing condition. In 2014, this would apply to students age 19 and over as well.

By proposing to apply these protections to student health plans, HHS is essentially saying that it does not consider student health plans to be so unique that they deserve to play by entirely different rules than other individual market plans.

HHS deserves quite a bit of credit interpreting the ACA in this way because there is language in the law that emphasizes that that the statue should not be applied in a way that would prohibit a college or university from offering a student health plan. Because HHS needs to pay attention to this part of the law as well, the proposed rule attempts to limit the way in which other consumer insurance protections apply to student health plans. For instance:

  • – Insurance companies, for their student health plans, would not be required to follow the Health Insurance Portability and Accountability Act’s guaranteed availability and renewability rules. To do so would require student health plans to be made available to individuals who are no longer students.
  • – Even though the ACA largely prohibits cost-sharing for preventive services, administrative fees charged by colleges and universities to fund student health services (including preventive services) would not be considered cost-sharing and would remain permissible under the proposed rule.
  • – Insurance companies would have more flexibility than other individual market plans as they phase-out annual dollar limits on benefits for student health plans. For policy years beginning anytime from January 1, 2012 to September 23, 2012, annual limits could be no less than $100,000. Student health plans would then be required to follow the same rules as other individual market plans, including a complete elimination of annual benefit limits starting on January 1, 2014.

The bottom line is that HHS has proposed to apply as many of the individual market consumer insurance protections as is permissible under the ACA to student health plans and this will make a enormous differences in the lives of many students enrolled in these plans.

Still hungry for more analysis about the new student health plans proposed rule? Check out this post at The Commonwealth Fund Blog and this post over at the HealthAffairs Blog.

— Patrick M. Tigue, Children’s Health Care Coordinator
New England Alliance for Children’s Health

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Rate review: how states can help make health insurance more affordable

Friday, December 10th, 2010

Thirty-nine percent increase in California. Fifty-six percent increase in Michigan. Forty-seven percent increase in Connecticut. Twenty-one percent increase in New Mexico. In recent years consumers have faced unprecedented hikes in their health insurance premiums. In many cases, these hikes are driven by the increasing costs of medical care. But what happens when an insurance company increases premiums without justification or based on faulty methodology?

Unfortunately, that probably happens more often than anyone would like. With support from the Kaiser Family Foundation, we at Georgetown University Health Policy Institute recently completed a study of how state insurance departments review and regulate insurance company rate increases. We found wide variations in state authority and practice. In particular:

– A state’s authority to review and approve rate increases in advance does not necessarily protect consumers from large rate increases, because the rigor and thoroughness of the review process varies across states.
– Many states do not have enough trained actuaries to review all filed rates. In addition, statutory clauses can “deem” rates approved if not acted on within 30 or 60 days, limiting states’ ability to conduct thorough reviews.
– Some states with statutory authority to disapprove rates can only exercise that authority in certain situations, such as for specific insurers or products (i.e., non-profit Blue Cross Blue Shield plans or HMOs). Others provide alternative regulatory pathways for insurers allowing them to avoid state review of their rates.
– Most interviewed states use subjective standards to guide the review and approval of rates, such as rates cannot be “excessive, inadequate, or unfairly discriminatory.” Such standards give states more flexibility, but can make the process appear arbitrary to the public.
– Most interviewed states have made little or no effort to make rate filings transparent. In many cases, carriers can designate some portions of the rate filing to be “trade secret” and thus not available to the public.

Under the Affordable Care Act (ACA), states are given unprecedented new resources to expand their review of health insurance rate increases. Many of the state regulators we spoke to plan to use the new money to hire new actuaries, conduct more thorough reviews and post more information on their website. The law also requires health plans that propose an “unreasonable” rate increase to provide a public justification for it. The Department of Health and Human Services (HHS) is expected to put out a rule defining an “unreasonable” increase in the coming days.

Based on our research, I think it’s important for advocates to know the following:

  1. Your state’s “prior approval” authority over rate increases doesn’t protect consumers from them. Even in states with full “prior approval” review authority, most rate review is conducted informally, without consumer input. Your insurance department’s leadership, resources and a culture of active review are equally if not more important.
  2. Find out whether your state insurance department has – or intends to hire – an on-staff health actuary. States should not rely on the health plan’s “actuarial certification” that its rates are justified. Rate review is not mechanical – it involves nuanced judgment calls. If you’re the actuary for the health plan, you’ll probably make those judgment calls in favor of your employer, whereas if you’re an actuary paid by taxpayers, you’re more likely to make those calls in favor of consumers.
  3. The HHS rule on rate review, as well as state standards, should provide an unambiguous and clear definition of an “unreasonable” increase. They should include objective metrics such as rate increases greater than a certain percentage of the Medical Consumer Price Index, or increases that are greater than 10 percent of the previous year’s filings would trigger an “unreasonable” designation. Such objective metrics shouldn’t be the final word, but should shift the responsibility to the health plan to prove its proposed increase is reasonable.
  4. Advocates should encourage their states to do more to make rate filings transparent, including posting the full filing on the Department website, not just summaries. More than anything else, greater sunshine on this process can provide both the information and motivation for meaningful rate reviews that will help lower premiums for consumers.

For more detail on the results of our study, including a sortable state-by-state table of rate review authority, see the report on the Kaiser Family Foundation’s website.

– Sabrina Corlette, guest blogger
Georgetown University Health Policy Institute

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Cross Post: Insurance Commissioners Respond to Consumer Concerns

Friday, October 22nd, 2010

This blog was originally posted on Say Ahhh! A Children’s Health Policy Blog

By now many of you have probably heard about the big news coming out of the NAIC meeting this week in Orlando. After seven months of intense debate and negotiation, the NAIC voted in favor of a regulation defining the ACA’s required “medical loss ratio” (MLR). They rejected several amendments that were heavily pushed by insurance companies and brokers, scoring a big win for consumers who deserve better value for their health care dollar.

What hasn’t been reported so widely is all the other work NAIC did this past week, from advancing model state laws on major consumer protections required by the ACA, developing a model law on state insurance exchanges, and defining how an insurer must justify an “unreasonable” rate increase. Here are a few highlights:

– A key NAIC task force adopted model state laws implementing three market reform provisions of the ACA: rescissions, young adult coverage up to age 26, and choice of health professional. These now will be reported up to the NAIC’s “B” Committee, which is the umbrella committee for health issues. The same task force is also developing model laws on: lifetime/annual limits, elimination of pre-existing condition exclusions for children under 19, access to preventive benefits, and grievances and appeals, all of which are ACA provisions that went into effect on September 23, 2010.

– Consumer representatives are urging changes to the model law on the kids’ “pre-ex” provision to encourage states to prevent “child only” health plans from withdrawing from the marketplace. We also made formal presentations applauding Commissioner Sevingy from New Hampshire and Commissioner Kreidler from Washington for their leadership and toughness in requiring their states’ insurers to offer coverage to kids.

The consumer reps also pushed for better notice requirements for health plans that have received a waiver from the ACA’s restrictions on annual benefit limits, so that consumers know that the plan doesn’t provide the full range of consumer protections promised under the health reform law. The NAIC’s working group on state insurance exchanges also met in Orlando. They’ve received a whopping 200+ pages of comments on their first draft of a model state law and sometime within the next two weeks they’ll schedule a conference call to receive oral comments. A few issues were raised in the meeting that are worth watching:

– Coordination with Medicaid. My impression is that the model law will probably not delve into the tricky issues of how the exchanges will coordinate with state Medicaid agencies. When one of the Commissioners asked about this, the chair of the work group, Commissioner McRaith from Illinois, said that they have not been working with Medicaid Directors, and emphasized that it would be a “NAIC Model” and therefore would focus on insurance-related issues.

– Dual regulation. The members of the work group were very concerned about exchanges potentially usurping their traditional role regulating health insurance through rate review, market conduct exams and grievances. They’ll probably add new language to the model that will have a more clear delineation of regulatory roles between state insurance departments and the exchange.

– Pediatric dental. The current draft model doesn’t have any language reflecting the ACA’s provision allowing the inclusion of stand-alone dental plans that offer pediatric dental benefits in the exchange. A representative from Delta Dental pointed that out to the group and Commissioner McRaith asked him to submit legislative language. The consumer reps will keep an eye on this issue as it develops.

– Another key NAIC task force has been working for many months to develop the form that insurance companies will have to fill out if they are proposing an “unreasonable” rate increase. This form will provide unprecedented transparency on rate increases, and will include essential information for consumers and employers to better understand the factors driving proposed increases. The task force finalized the form this week and reported it to the “B” Committee, in spite of last-minute opposition from America’s Health Insurance Plans (AHIP) and the Blue Cross Blue Shield Association. Even in the face of many hours of open and inclusive conference calls and meetings, both trade associations claimed that the form had been developed without sufficient industry input.

– Last but not least, the NAIC has created a new working group to tackle the issue of limited benefit plans, or “mini-meds.” A joint effort of the “B” Committee and an anti-fraud committee, the group will investigate whether plans are making misrepresentations about their products and whether they are being sold by unlicensed brokers. Because many of these plans provide little or no real coverage if someone actually gets sick, the group will also be looking into the “utility” of these products for consumers.

– Sabrina Corlette, Georgetown Health Policy Institute

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MLRs — Going South?

Wednesday, October 20th, 2010

Our sources at the National Association of Insurance Commissioners (NAIC) meeting in sunny Orlando sent an update on the storm brewing over the medical loss ratio (MLR) definition. For those of you new to MLRs, it’s been a long seven months for all of the folks embroiled in the efforts by the NAIC to define what are medical expenses versus profits or administrative expenses. Up until now, the NAIC has carefully worked to adhere to federal law and balance the interests of industry and consumers. But in Florida, those calm skies are growing cloudier as the final vote nears tomorrow morning.

The insurance industry has been pulling out all the stops the past few weeks to undermine the carefully woven fabric of the MLR regulation crafted by the NAIC sub-committees. Their threat to Commissioners: We will pull out of your insurance market and leave your residents without any options – a low blow considering the industry agreed to the compromises made on these very issues just months ago.

Insurance Commissioners are mostly non-committal as they prepare to file amendments to the MLR tomorrow and then have another commissioner-only discussion. The whole definition is up for a vote on Thursday. What should be clear to all is that if the amendments pass, the entire MLR will be meaningless and consumers will not benefit from the potential changes.

First up is national aggregation: Some national insurers are seeking aggregation, or pooling all of their MLRs across state lines for certain insurance markets. This would mean that if an insurer is in a state with a low MLR and another state with a higher MLR – the two numbers would be averaged – leaving consumers in the dark about how much of their premium dollars are spent on health care. This change not only goes against the definition of health insurance ‘issuer’ in the federal law but could also end up making national carriers look better than their local competition.

Second are credibility adjustments for small insurers. Insurers must hit the MLR percentage the required by ACA (85% in large group and 80% in small group and individual markets), or provide rebates to policyholders. There has been much discussion at NAIC about how to protect smaller insurers that may not meet the MLR standard because they only cover 1,000 people and random events (like few filed claims) affect their MLR, rather than their spending on administration and profit.

Previously, everyone agreed to the solution to adjust the MLR of these small carriers – like a handicap in golf – called a credibility adjustment. This is done through actuarial calculations based on a “confidence level.” Basically, the confidence level is the amount of certainty that insurers tried to meet the MLR in good faith, but that random events prevent them from meeting the MLR target. The bottom line is that a higher confidence level means a much weaker MLR standard. The draft regulation crafted by NAIC workgroups allowed a 50 percent confidence level. The issue was heavily debated, and the actuaries agreed that 50 percent made the most sense mathematically and from a policy perspective.

However, there is now a last-minute push to move the confidence level up to 80 percent, and to expand its reach to insurers that cover up to 75,000 people. As an example of how this would play out, every health plan in New York would qualify for a credibility adjustment and would gain between 10 and 25 percentage points on their MLR without actually streamlining anything but maintaining the status quo. Insurers will have a much easier time meeting ACA’s target for MLR, without reducing administration and profit.

Third, counting broker fees in the MLR calculation. There is a move afoot to take broker commissions out of both the premium and the administrative expense component of the MLR. This could be damaging to consumers. Broker fees need to be counted toward administrative expenses and profits.

Right now the NAIC has an opportunity to do something transformative for consumers. Let’s give them the support they need to do so. The vote is tomorrow morning. Take five minutes and call your Insurance Commissioner today. See our latest alert for talking points and more information.

— Christine Barber, Senior Policy Analyst

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Cross-Post: Consumer Rep Previews the National Association of Insurance Commissioners National Meeting

Friday, October 15th, 2010

This blog was originally posted on Say Ahhhh! A Children’s Health Policy Blog.

Hard to believe it’s come around again but that National Associatin of Insurance Commissioners (NAIC) is gearing up for a big national meeting – this time in Orlando, Florida from October 18-21. I and my fellow consumer representatives will be packing our Mickey Mouse ears and fanning out at the big regulator-industry confab to share our views on how to make the Affordable Care Act implementation work for consumers and families. The NAIC has a lot of work packed into just a few days. Here’s a preview of what they’ll be doing and how it might impact children and families:

* Helping states implement the September 23 patient protections. NAIC’s “Regulatory Framework Task Force”, chaired by South Dakota’s Director of Insurance, Merle Scheiber, has been drafting model laws to help states implement many of the “Patients’ Bill of Rights” protections in the ACA, such as the prohibition on pre-existing condition exclusions for children under 19, required coverage for young adults up to age 26, preventive benefits, restrictions on annual limits and the ban on lifetime limits, internal and external appeals, and the prohibition on rescissions. The Task Force has almost completed its efforts, and is expected to take up final edits and changes during its meeting in Orlando on October 18. State advocates can expect that many states will use these models to craft the necessary legislation to enforce these new consumer protections. We’ll also be talking to the regulators about strategies to keep child-only plans in the market and make kids’ coverage more affordable.

* Developing an Exchange model law. The NAIC has created a new workgroup, co-chaired by Commissioner McRaith from Illinois and Commissioner Praeger from Kansas, to develop a model law for states to establish an insurance exchange. This group will be meeting on October 20th to review the draft model law and discuss possible recommendations to HHS on issues like governance, exchange functions, network adequacy, marketing standards and quality ratings. During their summer meeting in Seattle, the workgroup also agreed to create a high-level liaison group to state Medicaid directors, led by Commissioner Praeger. We’ll be eager to hear about that group’s efforts to date, particularly on how they intend to address the “no wrong door” goals of the ACA and coordination of care for low-income families that may be cycling between Medicaid and commercial insurance.

* Medical Loss Ratios. NAIC’s draft regulation to define the medical loss ratio (MLR) under the ACA was posted on October 5. It’s likely to be voted on by NAIC’s Excecutive Committee and Plenary during their final meeting in Orlando on October 21st. We’re expecting some fireworks as the insurance industry pushes back hard against some of the tougher requirements. In particular, insurance agents are asking that they be left out of the equation. The bottom line for families purchasing insurance: the MLR standard is a measure of how much a health plan devotes to actual medical care as opposed to overhead and profits. We’ll be urging the NAIC to stay strong against industry pressure to weaken the standard.

* Consumer Information. One of the most important yet least publicized consumer protections in the ACA is the requirement for more transparency in the information provided to consumers about health plan benefits, exclusions, premiums and cost-sharing. NAIC has been charged with developing the standardized definitions and summary of benefits form that all qualified health plans must provide to consumers making purchasing decisions. The NAIC’s Consumer Information workgroup, co-chaired by Superintendant Kofman from Maine and Commissioner Miller from Oregon, has been working diligently all summer on the summary form and is now awaiting the results of focus group testing. Once the focus group results are back, the group will meet in Orlando to finalize the summary of benefits form. HHS will likely then include it in a regulation expected in March of 2011. The consumer reps on this group are working hard to make sure that consumers get the information they need to make purchasing decisions that are right for their situation, without having to worry about hidden contract language that leaves them financially vulnerable when they need care.

The NAIC meetings are open to registered participants, but the travel, hotel and fees are a significant expense. Advocates for children and families are welcome to contact any of the NAIC’s consumer reps to ask questions or share any comments.

– Sabrina Corlette, Georgetown Health Policy Institute

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Insurers behaving badly

Friday, October 1st, 2010

You may have heard that many health insurers across the country (including several major insurers such as WellPoint, UnitedHealth Group, Aetna, Cigna, and Humana) have been announcing the discontinuation of new child-only policies. These are insurance products sold in the individual market to children under age 19 that comprise approximately 8 percent of all individual policies. This is a relatively small group of children to be sure but it’s also a particularly vulnerable one. Parents who work for employers that do not offer insurance plans with dependent coverage and grandparents enrolled in Medicare who act as the primary caregiver for children often rely on these policies.

So, why are insurers saying that they will stop selling these products?

Insurers are discontinuing the sale of new child-only policies to avoid having to comply with a provision in the Affordable Care Act (ACA) that prohibits new group and individual plans from denying coverage for pre-existing conditions for children under age 19. This provision applies to all new plans except grandfathered individual plans (those in existence prior to September 23, 2010). Insurers claim that they are afraid families will only purchase insurance for their children when they are already sick or have significant health expenses (known to health policy wonks as “adverse selection”).

While the concern about adverse selection is not entirely unreasonable, the decision of insurers to address it by ceasing to sell new child-only policies is unnecessary. There are solutions available to insurers that can help to mitigate the risk of adverse selection, as outlined by Secretary of Health and Human Services (HHS) Kathleen Sebelius in this letter to Karen Ignagni, President and CEO of America’s Health Insurance Plans (AHIP). Measures permitted by HHS include (to the extent allowed under state law): allowing insurers to establish open enrollment periods, allowing insurers to adjust rates based on health status, permitting child-only rates to be different from rates for dependent children, and allowing a surcharge to be assessed for dropping coverage and subsequently reapplying.

However, many of AHIP’s members don’t seem to believe that these measures are adequate. Advocates should contact their state insurance departments to explore what creative policy options can be pursued that will result in the continued sale of new child-only policies. For example, the New Hampshire Insurance Department recently issued a bulletin warning insurers that New Hampshire state insurance law and the ACA taken together “require all health insurance carriers to take an application for any of their individual products from any New Hampshire resident, regardless of that person’s age. For an applicant under age 19, a health carrier must guarantee issue any of its individual products.” In other words, insurers offering coverage in the individual market in New Hampshire must offer child-only policies and can’t deny coverage based on a pre-existing condition to a child who applies for such a policy.

Children in New Hampshire are fortunate that advocates and regulators there are working together to require insurers to continue to offer child-only policies. In some states, policy options may be more limited due differences in state insurance laws but it remains important that advocates and regulators across the country work together to ensure that child-only policies remain as widely available as possible.

—Patrick Tigue, Children’s Health Care Coordinator, New England Alliance for Children’s Health

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