Medical Loss Ratio

As the details of the Patient Protection and Affordable Care Act (PPACA) continue to come to light, I want you to know that BenefitMall continues to actively participate and communicate with key health care groups and lobbyists in Washington D.C. voicing our concerns over the reform as well as presenting our suggestions.

Recently, BenefitMall contacted the National Association of Insurance Commissioners (NAIC) to share our comments and recommendations regarding Medical Loss Ratios (MLR), a result of the Patient Protection and Affordable Care Act (PPACA). The timing of this is essential, as the NAIC is working to provide suggestions to the Department of Health and Human Services on MLRs. In a letter sent to the NAIC, we covered the subject of the essential functions brokers perform in the small group market that directly contribute to the health of small group beneficiaries and how it is important that the MLR requirements do not impede such functions.

The MLR section requires health insurance issuers in the small group market to maintain a minimum MLR of 80%.  To meet this requirement, administrative costs and profits are limited to 20% of the health insurance issuer’s premium revenue.  This section does not provide guidance regarding the treatment of an important subset of expenses in the small group markets, those expenses that allow brokers to act as claim advocates and provide enrollment assistance to small group beneficiaries. 

Claim advocacy by a broker occurs when a small group beneficiary requires assistance resolving a claim that, for instance, was denied.  Often, the small group that the broker is servicing lacks a dedicated human resources manager and the broker provides some essential human resources services to the small group that, in a large group, is provided by an internal human resources team.  Another essential human resources service that a broker provides small groups is enrollment assistance.  Brokers explain the different benefits of the varying plan options that beneficiaries are presented with to help ensure beneficiaries have the right plan, at the right price, at the right time.  For instance, brokers will explain to the small group beneficiary which of their plan options cover the prescription drug the beneficiary needs for his/her chronic illness.

A final important human resource that brokers currently provide a small group is COBRA continuing coverage coordination.  When an employee separates from the employer, and is thus eligible for COBRA continuing coverage of their health insurance policy, in most instances in the small group it is the broker that mails the information to the former-employee and coordinates their continued enrollment under the health insurance policy.  Not only are these human resources functions that the broker provides the small group beneficiaries, each also directly improves the health of the beneficiaries.  

I recognize that it is difficult to differentiate between the payment a small group insurance issuer makes to a broker as compensation for the selling process and the payment that is made in recognition of the important health improving activities that a broker performs for small group beneficiaries as the payments are combined in an undifferentiated lump sum.  In addition, although the MLR requirements will require health insurance issuers to carefully consider all of their various costs and thus payments to brokers may be constrained, we feel it is important to preserve the broker’s role as a claim advocate and provider of enrollment assistance in the small group market.  Therefore, two proposals were offered to the NAIC for accounting for such payments in a manner that will allow brokers to continue offering the full range of services to the small group market. 

• First, a portion of premium that is reflective of the value of the quality improving activities performed by brokers, for instance 1-2% or approximately 20-40% of current commission paid, could be included in the definition of “activities that improve health care quality” and, therefore be included in the minimum MLR requirement of 80%.  This would be an accurate allocation of the funds expended by small group insurance issuers that allow brokers to perform the activities discussed previously that improve health care quality.  In addition, we noted that these activities directly contribute to the improvement of health care quality for specific beneficiaries.
   
• Second, the portion of the premium specified above could be excluded completely from the MLR calculation.  Although this option does not recognize some of the important functions that brokers perform, it would allow issuers to set aside money for this function.  Either of the two options would ensure that the important functions performed by brokers, including providing claims advocacy and enrollment assistance, continue. 

It is my hope that the NAIC take the opportunity to carefully review our arguments and use this information in their comments to the Department of Health and Human Services. I understand how important many of these issues are and therefore will continue to take an active stance in the amendment process.