NAIC Digs In On The Details

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Austin, Texas – Everything may be bigger in Texas, but at the National Association of Insurance Commissioners meeting opening here today, the key action hinges on the small but crucial details of insurance regulation.

In its two previous meetings, the NAIC took hotly debated votes to move forward on the medical loss ratio regulation, laying out what would count as medical costs and what would be administrative.

While this Austin meeting won't have any big votes, it will see insurance commissioners weigh in on key issues: whether they want to endorse legislation to alter the medical loss ratio and how they will proceed on health exchanges in the face of growing Republican opposition.

The meeting has attracted many of HHS's Center for Consumer Information and Insurance Oversight top officials, POLITICO has learned. CCIIO director Steve Larsen, Acting Director Gary Cohen, Exchanges head Joel Ario and Karen Pollitz, who heads up consumer information, will all be on site. Ario will testify at this morning's exchanges meeting.

The biggest event, however, will be the Sunday meeting on Reps. Mike Rogers (R-Mich.) and John Barrow's (D-Ga.) legislation to pull broker commissions out of the MLR equation altogether. The commissioners, while long sympathetic to the brokers' lobbying, did not believe they had statutory authority over brokers' commissions when they voted to approve the reform regulation in August. Now, they're reexamining the issue.

Even before they met, Florida Insurance Commissioner Kevin McCarty, who chairs the NAIC Professional Health Advisors Task Force, was circulating a draft letter <>  asking HHS Secretary Sebelius to delay implementing the part of the medical loss ratio that categorizes brokers' fees as administrative costs.

"The goal of trying to get more of the premium dollar devoted to actual medical spending is certainly a laudable goal," Sandy Praeger, the Kansas Insurance Commissioner who chairs the NAIC's health and managed care committee, tells POLITICO. "This does put pressure on companies to find meaningful ways to reduce some of their overhead, but it's almost like having the agent commission in that equation means it's kind of an easy fix for the companies. Maybe it'd be better if companies had to work a little harder."

While many insurance commissioners, notably Florida's McCarty and Louisiana's James Donelon, have been staunch in their support for the Rogers bill, there is still no consensus within the group. Washington state's Mike Kreidler, a Democrat who can often be seen huddling with NAIC's Consumer Advocates, is widely expected to oppose the move.

Broker groups believe that the nonpartisan NAIC's endorsement would hugely improve the bill's odds in Washington. It already faces harsh criticism from consumer advocacy groups, who have begun questioning commissioners' ties to the industry in advance of the Austin meeting. Sen. Jay Rockefeller (D-W.Va.), who has previously sent top health staffer Jenelle Krishnamoorthy to monitor the NAIC meeting, has strongly denounced the move.

"The NAIC, which has a stated mission of protecting consumers, must not put its name and reputation on the line for insurance salespersons at the expense of consumers and taxpayers," said Judy Dugan, research director of Consumer Watchdog, who will speak at a forum on the legislation Sunday.

Wall Street analysts agree that, if the broker bill did move forward, it would hugely boost insurance companies' bottom lines.

"We see that this bill has the potential to make the minimum medical loss ratio regulation a nonissue," Citi analyst Carl McDonald wrote in a recent note to investors. "Put differently, HHS estimated last November that the minimum medical loss ratio regulation would translate into plans paying rebates of around $1.4 billion. If this bill passes, we believe virtually all of those rebates will disappear."

Behind the scenes, insurance commissioners are exploring ways to streamline the process for applying for medical loss ratio waivers. Seven states currently have applications pending with HHS and seven more have told POLITICO they intend to apply in the coming months.

"The issue has been the NAIC is trying to help us develop an MLR format to file with," Mississippi Insurance Commissioner Mike Chaney told POLITICO in a recent interview. The Southern Zone insurance commissioners had a series of conference calls leading up to the Austin meeting to discuss the matter.

Before insurance commissioners begin grappling with potential changes to the medical loss ratio, they'll start the conference this morning with a four-hour long meeting on health exchanges that will largely focus on health exchanges.

An advance list of participants shared with POLITICO shows that this morning's meeting will include testimony on how to best integrate the health exchange with Medicaid, lessons from Massachusetts and Utah and an update from two states that received Early Innovator grants, Kansas and Wisconsin.

"This meeting will bring together valuable experience and viewpoints from various sectors that will be impacted," Illinois Insurance director Michael McRaith, co-chair of the subgroup, said in a statement.

What it will also bring: insurance commissioners who are struggling to set up exchanges in their own state. Two insurance commissioners on the Exchanges Subgroup, Montana's Monica Lindeen and New Hampshire's Roger Sevigny, have seen their Republican legislatures rebuff attempts to set up health exchanges.

Just this past Tuesday, the Montana State House shot down Lindeen's second attempt at legislation to authorize a health exchange. The bill, framed as a "compromise" after a first bill failed, did not make it out of a house committee.

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