By John Reichard, CQ HealthBeat Editor
August 13, 2010 -- The Obama administration should change the way it's interpreting "grandfather" provisions in the health care overhaul law — the better to truly allow consumers to keep their current health coverage if they choose and to cope with rising premium costs.
That's the message the nation's biggest health insurance lobby is sending lawmakers through a new "issue brief" circulated this week to members of the lobby, America's Health Insurance Plans (AHIP).
The new brief "may prove useful in your discussions with lawmakers and others during the congressional recess," America's Health Insurance Plans President Karen Ignagni advises insurers in a memo distributing the document.
AHIP also sent an 11-page letter this week to the National Association of Insurance Commissioners (NAIC) urging them to include certain interpretations in their recommendations to HHS on an upcoming regulation on "medical loss ratios." "MLRs" set minimums for what percentage of the premium dollar must go for health care and quality improvement.
Insurers and their GOP allies complain that an "interim final rule" issued by the federal Department of Health and Human Services makes it too hard for plans to keep grandfather status, which exempts them from some of the mandates in the overhaul, including requirements that plans offer full coverage of preventive care and that create mechanisms to allow enrollees to appeal health plan decisions.
They add that the rule belies the claim of President Obama that people can keep their current coverage under the overhaul, if they so choose. Grandfather status applies to health plans on the market when the overhaul became law March 23.
The rule keeps plans from raising co-payments and deductibles beyond a certain point without losing their grandfather status.
But Oklahoma's Republican insurance commissioner Kim Holland said in a recent interview that that's a problem. Why? Because one way for consumers in the individual market to avoid big premium hikes is to switch to coverage with higher deductibles and other out-of-pocket costs, she said.
But under the HHS rule, when a grandfathered plan raises premium charges and a policy holders tries to avoid the added cost by switching to higher-deductible coverage, all the mandates will kick in that drive up premiums, she said. Rules on grandfather plans allow changes in cost-sharing that are too modest to allow people to avoid big premium hikes by accepting more cost-sharing, according to Holland.
Holland maintains that under the overhaul law individual insurance will become unaffordable for many Americans since subsidies to help them pay premiums don't begin until 2014.
AHIP's issue brief makes a similar point.
It says larger increases should be permitted in cost-sharing without a loss of grandfather status. Grandfather status should be protected "to preserve affordable coverage options and limit disruption of coverage for currently insured individuals," the brief says.
AHIP says that the curbs on changes to grandfathered plans in the HHS rule "effectively make grandfathering temporary." AHIP adds that modifications should be permitted in a plan's formulary of covered drugs without a loss of grandfathered status, and similarly that changes should be permitted in the lineup of providers who participate in a plan's network.
HHS defends the rule as a way to keep plans from raising cost-sharing beyond certain limits without having to also comply with wider protections afforded by the overhaul law, such as the preventive care and appeals benefits.
Although HHS issued the rule in final form, its "interim" status permits comments to be filed pro or con. The deadline for those comments is August 15.
The other big rule AHIP is trying to shape is the one on medical loss ratios. Its letter to NAIC voices concern that its recommendations to HHS won't count spending on important quality improvement initiatives toward requirements that 80 percent of premium revenues in the small group market and 85 percent of premiums in the large group market go either for health care or improved quality of care.
Acceptable quality improvement programs should not be limited to those that are the market today, the AHIP letter says. Also, fraud prevention and detection programs should count as quality improvement, as should the cost of installing new "ICD-10" billing codes expected to generate more data relating to quality improvement.
In addition, "utilization review" programs that assess whether certain medical procedures are appropriate should be viewed as quality improvement. The programs promote product safety by ensuring enrollees get the right procedure at the right time and in the right place and also address concern over geographic variations in the use of medical imaging procedures, AHIP says.
The letter also argues that federal and state taxes and fees must be excluded when calculating total premium revenues in the MLR. Insurers are up in arms about a letter from key lawmakers saying some of those taxes should not be excluded and have obtained a legal opinion saying the letter cannot be used as evidence of legislative intent after passage of the overhaul law.
Democrats and their allies say insurers are launching an all-out lobbying assault to distort the medical loss ratio rule in ways harmful to consumers.