U.S. Department of Health & Human Services
September 30, 2010
Statement on the application of medical loss ratio standards to certain health plans under the Affordable Care Act
Jay Angoff, director of the Office of Consumer Information and Insurance Oversight, within the U.S. Department of Health and Human Services (HHS) released the following statement today, regarding the application of medical loss ratio standards to certain health plans under the Affordable Care Act:
"As many employers and insurers consider health insurance options for 2011, one question that has been raised is the applicability of provisions of the Affordable Care Act to health plans and coverage with special circumstances. HHS remains committed to implementing the law in a way that minimizes disruption to coverage that is available today while also ensuring that consumers receive the benefits the Act provides.
"For example, pursuant to the Affordable Care Act and our regulations, HHS recently announced an expedited process for plans to apply for a waiver from the requirement in the Affordable Care Act establishing minimum annual limits where such limits would result in decreased access or increased premiums. HHS has approved dozens of these waiver requests, most often filed by so-called "mini-med" plans, and in doing so, has ensured the continuation of health coverage for workers and their families. Complete waiver applications were generally processed in 48 hours.
"More recently, the issue of the applicability of the medical loss ratio requirements to plans such as mini-med plans has come up. HHS has not yet issued regulations implementing the medical loss ratio requirements because the Affordable Care Act tasks the National Association of Insurance Commissioners (NAIC) with first making recommendations to the Secretary.
"Although the NAIC is close to completing its work, we understand that some employers must soon make decisions regarding coverage options for 2011. As such, we fully intend to exercise her discretion under the new law to address the special circumstances of mini-med plans in the medical loss ratio calculations. According to the Affordable Care Act, medical loss ratio "methodologies shall be designed to take into account the special circumstance of smaller plans, different types of plans, and newer plans." We recognize that mini-med plans are often characterized by a relatively high expense structure relative to the lower premiums charged for these types of policies. We intend to address these and other special circumstances in forthcoming regulations."
Comment: So the Patient Protection and Affordable Care Act (ACA) didn't extend health care coverage to everyone and didn't enact significant cost containment measures, but at least it did establish regulations that would end insurance abuses such as low annual dollar caps on coverage and administrative excesses that waste dollars that should be going to health care. Or did it?
Next year plans are required to provide a minimum of $750,000 in coverage, phasing to unlimited coverage in 2014. Also group plans are required to pay out at least 85 percent of premium revenues for health benefits (medical loss ratio). These regulatory changes are essential if health plans are going to benefit the insured, even though that would require plan redesign by employers such as McDonald's and Jack in the Box that currently offer limited-benefit plans (mini-med plans) to their employees.
These plans offer as little as $2,000 a year in benefits. This could be perceived as a practical joke, but it certainly isn't funny. This isn't under-insurance; it's virtually no insurance at all. Also, with so few benefits paid out, these plans cannot possibly meet the required medical loss ratios. Though ACA will not insure everyone and will not control costs, the new regulatory rules were supposed to bring an end to these abusive un-insurance programs.
Under ACA the Department of Health and Human Services (HHS) was given an expanded role in regulatory oversight, so what is their response to these plans? They have established an expedited process for these plans to be granted waivers exempting them from the new requirements!
What will happen in 2014? What changes will take place in the interim that will cause HHS to terminate the waiver program and require removal of dollar caps on coverage along with compliance with medical loss ratios? If the employers need the waivers now, they'll certainly need them in 2014 when premiums are much higher because of the new regulatory requirements.
Is HHS really that sympathetic to employers while being so uncaring about the needs of their employees? I mean waivers... not just waivers... but expedited waivers! Just what was reform supposed to have accomplished?
As with so many of these daily messages, this would not even be a topic if Congress had enacted a single payer national health program - an improved Medicare for all.