Medical Quality Activity Definitions

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On April 14, 2010 the Federal Register published a notice for comments to PHS Act Section 2718(c) directing the National Association of Insurance Commissioners (NAIC) to establish:

  1. uniform definitions of the activities including defining which activities constitute activities that improve quality, and
  2. standardized methodologies for calculating measures of these activities that to take into account:
    1. the special circumstances of smaller plans,
    2. different types of plans, and
    3. newer plans

These uniform definitions and standardized methodologies will be subject to the certification of the Secretary.

For years, FASB (Financial Accounting Standards Board) has provided guidelines for SG&A expenses that apply to all industries.  With this PHS Act directive, health insurers can convert some SG&A expenses into medical expenses to raise their MLR.  Since the law allows activities that improve quality to be considered medical expenses, some SG&A expenses will qualify.  What does and does not improve quality and not violate FASB standards is the issue.

Expenses can be divided into Continue reading