Should Public Health Departments be Diverted to Monitor Private Insurance Companies? A Losing Case for the Medical Loss Ratio

by Ellen Shaffer

On Aug. 17 the National Association of Insurance Commissioners adopted proposed rules for measuring the Medical Loss Ratio (MLR), a key instrument for controlling health insurance premiums.  The MLR is the 80-85 percent of premiums that new law requires insurance companies to spend on medical care, or improvements to the quality of care (80 percent for small companies, 85 percent for large ones).  Companies that fail to meet that test must give subscribers a rebate. The usually out-gunned consumer representatives to the NAIC supported the state insurance commissioners’ vote to adopt the proposed rules unanimously, claiming a victory against insurance industry lobbyists.

But the EQUAL Health Network found a key provision that slipped through and that threatens both the effectiveness of the MLR, and the integrity of public health departments. A late amendment would allow insurance companies to count their collaborations with public health departments as quality improvements, making it easier for them to reach 80 or 85 percent without actually spending enough money on subscribers’ health care. The U.S. Department of Health and Human Services (HHS), which is now tasked with "certifying" the NAIC's proposal, is backing this proposal to date.

What this means:  Partnerships between private, for-profit health insurance companies and cash-strapped public health departments would be counted as part of the legitimate expenditures of enrollees’ premium dollars to improve their health. 

The key questions are:

1. Should insurance companies be able to get off the hook for paying rebates to customers, who may believe their company is unfairly denying them specific medical care in order to save money, by virtue of engaging in health promotion campaigns aimed at non-members of the plan?  Many such programs are thinly veiled marketing exercises.

Further, these programs can backfire directly on subscribers. "Wellness" programs give insurance companies privileged information about the health habits of current or prospective enrollees. Until 2014, they can use this info to cherry-pick enrollees; after that they can still charge more to enrollees who use tobacco.

 2. And should scarce public health resources be diverted to ascertaining whether or not these interventions are both legitimate and effective? Incentivizing insurance company partnerships to sponsor "wellness" and "community benefit" programs not only skews the purpose of the MLR, it can disadvantage genuine public health programs. It threatens to divert time, resources and credibility away from public health departments - who are expert and publicly accountable for improving the public's health, but not historically tasked with policing the insurance industry to ascertain that any insurance company-public health department alliance is bona fide, meets Community Guide standards, and does in fact improve the quality of medical care

This is a classic mismatch of policy priorities. Concerns about the proposal merit an open public airing. See EQUAL's analysis and the public health sign-on statement at: http://www.huffingtonpost.com/ellen-r-shaffer/insurance-companies-want_b_679603.html