Insurance Regulators Focus on Health Plan Expenditures

August 22, 2010

State insurance regulators last week adopted guidelines as to what health insurance companies can count as medical costs.

The action was taken at the annual meeting of the National Association of Insurance Commissioners (NAIC) in Seattle, Washington.

The commissioners adopted the policy in light of mandates of the federal health reform legislation requiring large group insurance plans to spend at least 85 percent of the premiums collected on medical expenses, and 80 percent for small group plans. 

A major objective of the mandates was to ensure that premiums go largely to providing health benefits and not to administrative costs.

The NAIC formally recognized case management and wellness programs as legitimate medical expenditures, and then expanded the definition of wellness and health promotion activities to include health education campaigns performed in conjunction with state or local health departments. 

The guidelines included the "blanks" or actual forms insurance companies will likely use to submit required financial information to regulators.

Insurers were unhappy with the policy, saying that it did not adequately accommodate expenditures to combat fraud and pursuing other strategies to keep health care costs low.

In a statement released in response to the NAIC’s action Karen Ignagni, president and CEO of America’s Health Insurance Plans said, “The current proposal could have the unintended consequence of turning-back-the-clock on efforts to improve patient safety, enhance the quality of care, and fight fraud."

The final regulation on health plan expenditures is being developed by the US Department of Health and Human Services and will be released later this year.