Health Care Law Reform : Health Care Lawyer & Attorney : McDermott Will & Emery Law Firm : Managed Care, Product Regulations

The Facts

Health insurance issuers face immediate deadlines as well as long-term timeframes for implementing health care reform.  Several initiatives are underway, such as the Early Retiree Reinsurance Program. Other market reforms, including lifetime and annual dollar limit restrictions, apply to new issues and renewals beginning September 23, 2010, although limited exceptions may exist for grandfathered plans.

Quickly following are federal review of premium rate increases and medical loss ratio (MLR) standards (along with the risk of mandatory rebates if exceeded).  Multiple, and differing, statutory provisions, such as the small groups definitions, add complexities.

What’s at Stake

Implementing these reforms raises several common questions and issues:

• How do health insurance issuers modify existing products and prepare state product and rate filings to reflect new benefit requirements that are vague or undefined and for which guidance may not yet exist?
• How should health insurance issuers advise their customers?  Should grandfathered status be preserved, or will the conditions be too limiting to be practical?  The answer may differ for self-funded and fully insured plans.
• How do health insurance issuers implement new operating requirements, such as MLR standards, where state filings will need to be prepared prior to adoption of the standards?  How should existing small group requirements be reconciled with new definitions for small groups?

Steps to Consider

In addition to monitoring the release of regulations and other guidance, health insurance issuers should consider strategies for implementing reforms for which there is minimal guidance.  Consistency as to approach, coupled with a good faith defense of actions taken following critical legal analysis, may mitigate some of the potential risks.  Developing a schedule for immediate requirements is advisable, while keeping in mind the longer-term reforms that take effect upon launch of health insurance exchanges.

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The Facts

Both the Senate and House health reform bills would impose Medical Loss Ratio (MLR) requirements on insurers. MLR measures the percentage of an insurer’s premium revenue spent on health care services. In the House bill, the Secretary of HHS would have to establish the MLR at or above 85 percent. Any issuer with a lower MLR would have to provide “rebates to enrollees of the amount by which the issuer’s medical loss ratio is less than the level so specified.” The House bill also would impose MLR requirements on Managed Care Organizations (MCOs) and Medicare Advantage Plans (MA Plans). The Senate bill is less onerous for insurers because the MLR is currently set at 80 percent and state taxes would be excluded from the MLR determination. Note, however, that potential revisions to the Senate bill reportedly include a 90 percent MLR. In the House bill, the MLR provision would expire January 1, 2013 (excepting the MA Plan and MCO requirements), while the Senate’s would remain in effect until December 31, 2013. 

What’s at Stake

Health insurance issuers could potentially be forced to provide significant rebates. The cost of these rebates will greatly depend on which costs are excluded from the MLR determination. Also, the MLR provisions in the House bill applicable to MA Plans and MCOs have no sunset provisions, thus increasing their potential long-term impact.

Steps to Consider

• Follow the legislation closely because it is a very fluid process, and assess its impact.
• Understand the impact of the proposed MLR requirements and be prepared to adapt quickly to their requirements.
• Closely analyze which details are left to the Secretary of HHS to define by regulation. The rulemaking process will provide an opportunity for advocacy, should MLR provisions be enacted.

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