DOI’s MLR Turn

The Division of Insurance held a hearing this morning on the definition of “medical loss ratio” under Massachusetts law.

The DOI released an emergency regulation on October 1st. Medical loss ratio (or MLR) is the percentage of an insurance premium that is spent on medical-related expenses, as contrasted with administrative expenses and profits. Massachusetts’ small group health insurance cost containment law, Chapter 288, requires carriers to spend at least 88 percent of each premium dollar on medical-related expenses next year and 90 percent in subsequent years. Carriers who don’t meet these standards face rate reasonableness review.

However, defining what falls within the “medical-related expenses” portion of the ratio has been a contentious issue. The emergency regulation mirrors the definition developed by the National Association of Insurance Commissioners (NAIC). (Check out our blog discussion).

At today’s hearing, representatives from the insurance and underwriters’ industries, including David Shore of the Massachusetts Association of Health Underwriters, Stephanie Richardson of the Massachusetts Association of Health Plans and John Sullivan of Blue Cross/Blue Shield, argued that Massachusetts should adopt a definition promulgated by the NAIC and currently awaiting approval by U.S. Health and Human Services. They did, however, highlight some specific concerns they had regarding the definition of carrier as well as the role of brokers.

Health Care for All urged DOI to adopt a definition that would honor the legislature’s intent – ensuring that consumers and businesses get real value for the premiums they pay. Recognizing the role played by the NAIC regulations, HCFA argued that MLR should only count clinical health care services as medical expenses and should not include non-clinical costs, like combating fraud and coding expenses. These services may benefit consumers but do not qualify has clinical health services. HCFA also submitted extensive written comments.

There is still time to weigh in with DOI as they are accepting comments through this Friday, November 12th. Comments should be sent to Doidocket.Mailbox@state.ma.us and list Docket No. G2010-13 in the subject line.
-Elyse Ball

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