Insurance industry reform is a significant part of the Patient Protection and Affordable Care Act (PPACA) law, having major changes in various practices and policies that will take effect either this year or next.

The reforms involve medical loss ratios; reviewing increases in health plan premiums; prohibiting lifetime limits on coverage and curbing annual limits; prohibiting rescinding (withdrawing) coverage; prohibiting ineligibility due to pre-existing conditions for children; and requiring some coverage for preventive care.

Medical Loss Ratios
Medical Loss Ratios (MLRs) are a hot topic in health care reform and a major issue for Senators Jay Rockefeller (D-WV) and Al Franken (D-MN), who last year introduced the Fairness in Health Insurance Act--much of which became the MLR provisions in the PPACA.

Medical Loss Ratios involve the amount of a health care policy premium that is spent on actual medical care, versus administrative costs. The higher the ratio, the more of the premium dollars spent on medical care. Under the PPACA, insurers of health plans, including grandfathered plans, must report annually to the Department of Health and Human Services (HHS) on the percentage of total premium revenue spent on clinical services, activities that improve health care quality and all non-claim costs, including explanation of the nature of the cost other than state taxes and licensing/regulatory fees. HHS will make the reports available to the public on its website. In 2011, insurance companies will be required to give rebates to enrollees if the MLR falls below minimum standards.

The recently created Office of Consumer Information and Insurance Oversight (OCIIO) within HHS will handle the MLR reports and other insurance issues including the high-risk pools, rate reviews, the health insurance exchanges and information and support for consumers. The National Association of Insurance Commissioners (NAIC)--an organization of state, District of Columbia and U.S. territory insurance regulators--will establish uniform definitions and standardized methodologies for determining the services that will constitute clinical services, quality improvement, and non-claims costs in relation to the MLR provisions. Those definitions might help allay concerns expressed by Senator Rockefeller and others that insurance companies will shift administrative expenses to the medical expenses category. (See, DM 12409). HHS Secretary Kathleen Sebelius has also asked for NAIC's input on other issues pertaining to the MLR provisions, including the types of supporting documentation that health insurers can include with their data submissions.

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