Medical Loss Ratios & Health Insurance: Are You A "Constructionist" or an "Activist?"

As readers may recall from a prior Disease Management Care Blog posting on the topic of medical loss ratios (MLR), the ratio of health insurer medical costs to total costs is conceptually simple, yet administratively complicated. One reason is because providers of medical services - such as hospitals and physicians - are accepting various forms of risk transfer such as capitation, gain sharing and risk contracting that behave like insurance. Health insurers, in turn, have been taking on clinical roles that look and feel like traditional provider services. Examples of the latter include quality assurance, patient reminders and wellness initiatives.

Will the Patient Protection and Affordable Care Act's (PPACA) 80% to 85% MLR requirement make this mash-up "better?"

Opinions seem to fall into two camps:

1) The MLR requirement limits administrative costs and maximizes the spend on health care services and is evidence of an enlightened civilization at work that, by the way, is also providing a target rich environment for health policy bloggers

2) The MLR floor is a clumsy, ill-fated, if well meaning, intrusion into the business operations of insurers that will assure the perpetual employment of a host of health lawyer-regulators which, by the way, provides a target rich environment for bloggers.

The DMCB really thinks that the two points of view above embody a much bigger debate about the role of health insurance in reform between the

1. Constructionists, who view insurance as a means of monetizing and pooling risk in a way that enables the payment of needed health care services, or ...

2) Activists, who favor using the monetizing and pooling of risk to enable the betterment of needed health care services.

Interestingly, despite Senator Rockefeller's apparent constuctionism, the PPACA seems to favor activism. While the DMCB finds the legislative language as murky as a Gulf of Mexico oil plume, it appears to require that health insurers improve health care quality including "effective case management, care coordination, chronic disease management and medication and care compliance initiatives including through use of the medical home model.... activities to prevent hospital readmissions... including patient centered education ...(and).... activities to improve patient safety and reduce medical errors." By the way, the activist view of Medicare may underlie the nomination of Dr. Berwick to lead the Agency.

Unfortunately, since the law is flawed by being both ambiguous and ambivalent, we're in for an interesting time on this issue. Stay tuned.