WASHINGTON — For Aetna and other insurers, the battle over
health-care reform is not over. It has just shifted to new
decision-makers, a more obscure process, and a series of questions that
are narrower, yet still significant.

Exhibit A in the ongoing lobbying fray is an effort to shape one of
the most important regulations in the health-care overhaul law: a
provision designed to ensure that most of consumers’ premiums pay for
actual medical care, not administrative costs or profits.

To that end, Congress mandated in the new law, the Patient Protection
and Affordable Care Act, that at least 80 to 85 percent of premiums
must be used to pay for clinical care or activities that improve health
care quality. If insurers fail to meet these thresholds, they will have
to pay rebates to their customers-potentially costing them millions of
dollars.

But lawmakers did not define "clinical care" or "health care
quality," leaving that task to regulators who are being bombarded with
suggestions about what to include and exclude as they seek to turn the
legislative provision into a workable regulation.

"The insurance industry is very engaged, but so are the consumer
advocacy groups," said Kim Holland, Oklahoma’s top insurance regulator
and an officer with the National Association of Insurance Commissioners,
which Congress charged with drafting this regulation.

Interest groups spent more than $500 million lobbying on
health-related issues in 2009 and another $100 million-plus in the
first quarter of 2010, according to an analysis by the Center for
Responsive Politics, a nonpartisan group that tracks money in politics.
That total covers far more than just health care reform, but that
issue has been the top focus for a gamut of interests, from doctors to
hospitals to insurance companies and consumer groups.

Of the $19 million doled out by insurers and other health service
interests so far this year, Aetna is the top spender, with a $1.6
million tab for its Washington lobbying activities from January through
March, according to the CRP tally. Blue Cross Blue Shield is not far
behind, having spent $1.4 million so far in 2010.

Now that the law has passed, these and other insurance firms have
turned their firepower towards implementation. And the battle over the
premium issue is a fresh target.

The percentage of premium dollars an insurance company spends on
medical care, as opposed to administrative costs or profits, is known in
health care jargon as the "medical loss ratio."

Consumer groups want the definitions of what can be counted toward
patient care to be narrowly written, while insurance companies are
pushing for them to be as expansive as possible. About the only thing
they agree on is that there is a lot of wiggle room for the regulators
writing these definitions, and that the stakes are very high for both
sides.

"No other aspect of PPACA will be as influential in shaping the
future of the health care marketplace in the United States," Steven B.
Kelmar, a top Aetna lobbyist, wrote in a 36-page letter
to the federal Department of Health and Human Services, outlining the
company’s priorities in shaping the new premium regulation.

Carmen Balber, director of the Washington office for Consumer
Watchdog, an advocacy group that has been highly critical of the
insurance industry and is closely tracking implementation of the health
reform law, concurred.

"This regulation was one of the most concrete steps that Congress
took to rein in costs for consumers," she said. "The idea here was to
ensure that insurers spend more on patient care and less on overhead and
profit."

Balber and others fear that the insurers are now trying to manipulate
the rule, so they can categorize administrative or cost-containment
expenses as medical care or quality improvement.

For example, she said, Aetna and other insurers have urged regulators
to include health-information technology costs under the umbrella of
"quality improvement" measures, making them count towards a firm’s
patient care expenses.

She said including some of those costs, such as creating electronic
medical records for patients, makes perfect sense. But she’s concerned
that other information technology systems that insurers used to increase
profits and or squeeze customers will also get lumped in. She cited,
for example, an upgraded information system that Aetna used in the early
2000s, according to a Wall Street Journal article, to "identify and
dump unprofitable corporate accounts," while also increasing premiums
and boosting profitability.

"That’s not patient care," Balber said.

An Aetna spokesman, Mohit Ghose, said Aetna would not comment beyond
the letter it submitted to HHS on this issue. That letter does not make
any mention of the IT system cited by Balmer.

Kelmar, the company’s lobbyist, wrote that health plans "routinely
gather, analyze and report health care quality information," as part of
their basic operations, and he says these tools are vital to improving
patient care. He cited the use of information technology programs to
help improve disease management, to educate customers, and provide
clinical advice or counseling.

"Health information tools allow clinical information to be shared in
real time among patients and providers, reducing the risk of medical
errors and unnecessary/duplicative services," Kelmar wrote.

But he also cited other items, such as upgrading to a new coding
system for health care expenses and "utilization review," which Aetna
says helps reduce unnecessary or inappropriate services but which
critics say is used to cut costs and restrict treatments.

Another major point of contention in this mostly behind-the-scenes
fight is how much detail insurance giants have to provide in reporting
the percentage of premiums they spend on medical care. For example,
there’s a question over whether companies can average those percentages
at the parent-company level or whether they have to break it out by
subsidiaries. Additionally, some insurers do not want to provide that
data at the state level.

"This is really an issue of scale and size," said Robert Zirkelbach, a
spokesman for America’s Health Insurance Plans, an insurance lobby
group. He said a company might insure thousands of customers in one
state, and only a few in another, so calculating the latter figure
separately "might not provide statistically relevant data."

But others say that allowing companies to provide only top-line
numbers will obscure significant variations in the insurance market and
make it easier for large insurers to meet the new targets by averaging
disparate numbers.

"Since insurers are regulated at the state level and register their
companies by state, allowing broader aggregation across states or even
nationally just creates opportunities for companies to game the new
law," said Judy Dugan, research director of Consumer Watchdog. "If
patient care ratios are reported by state, and by each corporate
subsidiary, a few insurers may end up too small to measure. But the
larger companies would all be kept honest."

As these narrow questions are hashed out, some in Congress are
worried that too much flexibility in the definitions of the new rule
will allow insurers to "cook their books," as Sen. John D. Rockefeller,
D-West Va., put it, rather than encouraging the industry to improve
patient care.

"I am extremely concerned that the health insurance industry is
mounting an all-out effort to weaken this important consumer protection
provision," Rockefeller wrote in his own letter to HHS.

Zirkelbach, of America’s Health Insurance Plans, said the industry is
not trying to weaken the provision, but to make it effective. "If the
MLR definition is too restrictive, it will inhibit plans’ ability to
continue to offer the types of quality services that patients want and
rely on today," he said.

He said, for example, that insurers have pioneered new health
programs, such as disease management and prevention and wellness
initiatives, "to ensure that patients are getting the right health care
treatments, at the right place, at the right time," and they are now
seeking a good definition of health quality improvement to preserve and
foster those efforts.

Holland, the Oklahoma insurance regulator helping to craft these new
rules, said she and her colleagues have to strike a careful balance.

"The definitions of clinical care and medical quality have a lot of moving parts," she said.

The National Association of Insurance Commissioners is trying to make
sure they leave enough room for companies to innovate and develop new
tools that genuinely improve the health care system, without giving them
so much leeway that they can pass off expenses that are not valid.

The process is all the more complicated because Congress charged the
NAIC, a trade association of state insurance commissioners, with
crafting these new rules, instead of a federal government agency, such
as HHS. Balber said that having a private entity, albeit one made up of
public servants, handle this issue has made the already murky process of
federal regulation-writing even more indecipherable.

But the NAIC’s Holland said the debate over this new rule has been
open, with all the stakeholders at the table offering their views. The
process is so complex, she noted, that NAIC missed its first deadline of
getting a rule to HHS for review and certification.

"We really have to think through each and every one of these items,"
she said. "Consumers are spending a lot of money on health insurance,
and they want to make sure most of that money is spent on their care."

She expects the association to finish its work sometime in August.
Insurers have to comply with the new 80 to 85 percent thresholds by the
time they start their next plan year, which for many will be between
September and January. The customer rebate provision goes into effect on
Jan. 1, 2011.