Florida Insurance Commissioner Kevin McCarty said he would ask the federal government for a waiver or a reasonable definition of medical expenses before it imposes a minimum medical loss ratio requirement on health insurers beginning next year.

 

"My deep concern, is if we don't do something reasonable to address this issue or get a waiver or something, people won't have insurance because companies will pull out of the market," McCarty said. "We want to make sure when we do those calculations we have an insurance industry left."

 

As it stands now, a large share of Florida health plans would not meet the new federal standard, said McCarty who held a joint public hearing with the Florida Health Insurance Advisory Board May 4, on the matter in Orlando where largely health insurance agents and representatives testified.

 

Florida health insurers described a range of dire consequences for consumers if the federal government succeeds in imposing new rules on plans written after September 2010 that require insurers spend 85 percent of premium dollars from small and large group plans – and 80 percent from individual plans – on medical expenses.

 

Harry Spring, regional legislative director for Humana, said it could "cause volatility that drives up costs and reduces choice."

 

Steve Dziedzic, chief actuary of Assurant Health warned of a "significant disruption to the individual market" that could "limit options to consumers." He called for "transitional relief" where plans could meet a 70 percent threshold until 2013 and 80 percent by 2014 when the health insurance exchange markets are available.

 

"Until then, prices will go up," Dziedzic said. "The individual market will be dominated by large carriers, leaving those who can still purchase insurance without choices."

 

Several health insurance representatives urged McCarty to recommend an expanded definition of medical expenses. Although Congress drafted a 2,000-page bill largely covering health insurance, it left open to interpretation a phrase that could make a huge difference in the outcome of the law: the very definition of a medical expense.

 

It says regulators should include expenses that "improve healthcare quality."

 

Spring urged regulators to consider investments in care coordination, disease management, health information technology, wellness programs, licensure, and fraud and abuse efforts. "These represent real value to member's care," he said.

 

John Cantillo, executive vice president for Coventry Health Care of Florida included a similar list of considerations in addition to health fairs.

 

Steve Ecenia, an attorney and lobbyist for Hospital Corporation of America, which runs 40 hospitals, ambulatory surgery centers and outpatient imaging centers in Florida, testified in support of a strict definition of quality improvement.

 

"The spirit of the law is to require 85 percent of premium dollar to go to medial costs," Ecenia said. "It's not intended to allow plans to reclassify expense of general administration."

 

Already though, that's exactly what's happening. Press reports in May described how WellPoint, based in Tampa Bay, moved $500 million in administrative costs into the medical expense category in preparation for the new federal requirements.

 

Jon Mills, a spokesman for WellPoint, said the company re-classified expenses that were discussed as aspects of quality improvement in various health reform proposals.

 

"Examples include health and wellness initiatives, weight loss programs, smoking cessation treatments, our Future Moms program and nurse-assistance hotlines," Mills wrote in an email response. "These are appropriately treated as benefit expenses because they provide extensive health benefits and value to our members, and are services that are increasingly requested by our customers."

 

He also said WellPoint had invested significantly in managing people's health in recent years and had not "gone back to review how we had classified these new costs."

 

Ecenia, with HCA, urged regulators to stick to already established definitions of administrative and claims expenses, which do not include professional credentialing, grievance procedures, quality assessment improvements and benefit determinations. In addition, he said large portions of information technology and fraud and abuse programs could not be measured "in any meaningful sense to address healthcare quality."

 

"There needs to be a quantitative approach to measure quality," Ecenia said.

 

Health insurance agents, too, are struggling to find ways to measure their value. Several agents familiar with the industry said the days of professional insurance agents are numbered.

 

"Basically it's just a matter of time before agents are taken out of the process," said Mark Tiralosi president of the Florida chapter of the National Association of Insurance and Financial Advisors. "A lot of the sales folks we work with on a day-to-day basis feel they too will be out of jobs in the relatively near future. With the way the health insurance bill is set up, there's no question it's set up to fail. The only thing left is the insurance companies doing third party administration for the government. Most sales teams and agents will be unemployed."

 

McCarty said there's a reluctance to cut into agent commissions. "It's hard to believe that the goal or objective was to eliminate agents who are the front lines of consumer protection," he said.