NAIC Delays Detailed Recommendations On Health Insurer Spending

Reuters: "State insurance regulators say they will need more time to produce their recommendation on an issue at the center of the debate over how U.S. health insurance companies spend their customers' dollars." The National Association of Insurance Commissioners (NAIC) was aiming to provide a "recommendation on how to define medical expenses versus administrative spending by June 1," but said today that it will take at least a month longer "to deliver a detailed response." According to an NAIC statement, the group of insurance regulators will "respond to U.S. Health Secretary Kathleen Sebelius by June 1 but it 'will not include the final definitions and calculation methodologies.' The group said no date had yet been set, but a spokesman said the goal was July 1."

As a result of the new health reform law, medical loss ratios will be limited. "Starting in 2011, large health insurance plans must spend at least 85 cents of every premium dollar on actual medical care while small or individual plans must spend at least 80 cents on the dollar.  At issue is whether certain services such as nurse hotlines and electronic medical records are considered crucial to providing better care or administrative programs aimed at reducing an insurer's costs" (Heavey, 5/24).

Meanwhile, The Washington Post reported earlier today that regulators are "trying to resolve" which insurance plans must comply with the health law's new requirements. "In keeping with President Obama's promise that you can hold on to your insurance if you like it, the new law exempts existing health plans from many of its provisions. But the law leaves it to regulators to decide how much a health plan can change without giving up its grandfathered status." The answer could test how Americans are affected by the law. "Some consumer advocates say that grandfathering could become a giant loophole through which many health plans escape aspects of the overhaul."

"At issue is whether health plans covering millions of Americans must meet requirements such as covering screenings for breast cancer and other diseases without charging co-payments, and limiting annual out-of-pocket expenses. Depending on the outcome, grandfathered plans could continue tailoring their own benefits, or they could be required to offer at least a minimum set of benefits to be defined by the federal government." Employers would like to change some minimal aspects of their plans without losing their grandfathered status, but all plans will have to adhere to some aspects of the law. "For example, even plans that were in place when the law was enacted must eliminate lifetime limits on the dollar value of coverage and enroll dependents up to age 26." But, employers who pay for health care from their own accounts won't have to adhere to a minimum benefits package (Hilzenrath, 5/24). 

Related KHN story: Health Law's "Grandfather" Clause Could Deprive Consumers Of Key Benefits (Galewitz and Carey, 5/10).