NAIC Fall Meeting: As One Issue Winds Down, Another Rears Its Head

The National Association of Insurance Commissioners (NAIC) convenes three times a year to hammer out model state laws and discuss current issues in insurance regulation. At their most recent meeting, two issues stood out: the long-coming Network Adequacy Model Act was finally adopted, and regulators took another look at the long-ago settled definition of “quality improvement” under the Affordable Care Act’s Medical Loss Ratio requirement.

First, the big news: The network adequacy model act – revised to reflect substantial changes in the health plan market since the model was first developed in 1996 – was formally adopted by the Executive Committee. The newly adopted model act includes key consumer-friendly provisions, such as protections against surprise out-of-network charges (sometimes called “balance billing”). These provisions could help protect consumers who use emergency services or unknowingly get care from an out-of-network provider at an in-network facility and are hit with a large bill.

Now the action moves to the states. When the NAIC adopts a model law, the state insurance commissioners commit to submitting the model to their state legislatures. When it comes to network adequacy, expect to see providers, consumer advocates and insurers at the state level pushing for changes to the model – some that would make it more protective for consumers and others that might relax the standards. With numerous drafting notes and bracketed wording that provides states with options for tackling the details of a network adequacy standard, the model act allows state legislators and regulators to “choose their own adventure.”

One area that consumers sought but failed to win in NAIC discussions on the model act got a boost recently from the proposed 2017 Benefit and Payment Parameters Rule. The NAIC work group rejected a requirement to use quantitative network adequacy standards, which are in use in nearly half the states now. The proposed rule would require Federally Facilitated Marketplaces (FFMs) to use quantifiable network adequacy standards, such as time and distance standards, similar to those in use for Medicare Advantage.

In another area – surprise out-of-network charges – the proposed rule undercuts stronger provisions in the model act; more on that to come. For a more complete description of the proposed rules’ many pieces, see Tim Jost’s detailed blog.

The other area of action at the NAIC meeting was in the Medical Loss Ratio Quality Improvement Activities (B) Subgroup of the Health Insurance and Managed Care (B) Committee. There, regulators heard testimony from industry, providers, consumers and brokers on whether the definition of quality improvement activities should be revisited. For those who’ve lost track of this issue, the ACA requires insurers in the individual and group market to spend at least 80% of premiums on health care relative to administrative costs, overhead and profits. When insurers fall short of the threshold, individuals and employers enrolled in those plans are entitled to a rebate.

Prior to the ACA, many states had MLR requirements, but largely defined medical costs to include only medical claims paid. The ACA broadened what counts in that category to include, among other things, quality improvement activities. Since the MLR has been in effect, more than $2.4 billion in total refunds have been paid to consumers. The NAIC developed a model regulation that provides definitions and methodologies for calculating MLRs, including a definition for “expenses to improve health care quality.”

At the meeting last month, insurers urged regulators to revisit that definition and consider broadening the types of activities that can be counted as quality improvement expenses, including, potentially, activities to reduce and prevent fraud. Consumer representatives argued for holding off on changing the definition until data show it’s needed. As they wrapped up the meeting, regulators said they wanted to take a closer look at the quality improvement data insurers submit to NAIC and invited comments from interested parties until January 15, 2016. In the meantime, deep into the proposed 2017 Benefit and Payment Parameter rule, CMS requests comments on whether to count fraud prevention activities among “incurred claims,” similar to the request insurers made to NAIC.

In the months to come, there will be more on network adequacy standards, with potential action at the state level and a final rule for FFMs. It remains to be seen what happens, if anything, on the MLR front. Either way, we’ll keep CHIRblog readers in the know!


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The opinions expressed here are solely those of the individual blog post authors and do not represent the views of Georgetown University, the Center on Health Insurance Reforms, any organization that the author is affiliated with, or the opinions of any other author who publishes on this blog.