The NAIC "Blank" Proposal, the Medical Loss Ratio and Disease Management: An Explanation

The Disease Management Care Blog has driven by those unfortunate people. The car stopped by the side of the road. Hood open. The man? Staring at the engine maze of boxes, belts, wires, bolts and metal, looking for that disconnected or unset something to reconnect or reset. The woman, of course, is on the cell phone. She is intelligently calling AAA, which she joined months ago against her partner's advice. She is arranging for roadside assistance.

Such was was the initial reaction of the male DMCB when it opened the hood and stared at the just-released National Association of Insurance Commissioners' (NAIC) "Blanks Proposal." Readers may recall that this is the NAIC's long awaited response to the Affordable Care Act's requirement that health insurers use 80% to 85% of their premium dollars toward patient care. Defining just what comprised "patient care" was left up to the NAIC.

In typical actuarial fashion, the released "Blank" is a maze of obscure boxes terms and calculations that defies easy understanding. Looking down at it, it made the DMCB want a reset by hitting an "Easy" button. However, since the DMCB has changed oil, swapped air filters, replaced brake shoes, repaired mufflers, topped brake fluids, drained radiators and rotated tires, it figured it would dive right in anyway. That didn't work. So, it took an important cue from the spouse. It got on the cell phone and called some folks for some much appreciated help.

Here's what it found.

As the DMCB understands it, the "Blank" is the proposed form that would need to be completed by health insurers when they submit information about their expenses to their respective State Departments of Insurance. Close examination reveals that on line "7" on page 2, the preliminary MLR includes "total incurred claims" plus "total of defined expenses incurred for improving health care quality." The DMCB then headed over to page 16 of the document and found that the NAIC would like to define "improving health care quality" as....

"... plan activities that are designed to improve health care quality and increase the likelihood of desired health outcomes in ways that are capable of being objectively measured and of producing verifiable results and achievements.... [They] should be grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized professional medical societies, accreditation bodies, government agencies or other nationally recognized health care quality organizations. They should not be designed primarily to control or contain cost, although they may have cost reducing or cost neutral benefits as long as the primary focus is to improve quality..... [They] can include case management, care coordination and chronic disease management .... such as providing coaching or other support to encourage compliance with evidence-based medicine" (italics DMCB).

This is very good news for the disease/care management industry. This will clearly preserve the ability of insurers to buy their services. No wonder why the DMAA is pleased with the outcome. If care management activities had been excluded from the MLR (and therefore counted as an administrative expense), the most likely outcome would have been reductions in these programs.

And check out the uncharacteristically measured response of HHS Secretary Sebelius in her HealthCare.gov blog post. No longer able to cling to her Democratic allies' canards about MLR gaming with faux-quality expenses, she thanks the NAIC and then changes the subject by recycling the anti-insurer grousing about "marketing, medical underwriting, executive salaries, and bonuses that don’t improve health outcomes and drive up costs." Right.

The DMCB isn't impressed with the health insurers' trade association "AHIP" response to the Blank either. The DMCB agrees with one observer that AHIP has little political reason to broadcast any agreement with NAIC; to do so would only prompt additional scrutiny over the 90% that AHIP successfully got out of this process.

This is not the end, since this seems to be a proposal and additional language will need to be written. The DMCB will continue to stare under the hood. And if anyone wants to call (or email) with additional roadside assistance and insights about this, please do not hesitate to do so.