On Dec. 2, the Centers for Medicare & Medicaid Services (CMS) issued a final regulation that will ensure health insurance companies spend at least 80 percent of consumers’ health insurance premiums on medical care, not income, overhead and marketing. Insurance companies that fail to meet the new standard are required to provide a rebate to consumers.
MLR rules under the Patient Protection and Affordable Care Act (PPACA) took effect on Jan. 1, 2011, but the new final rule makes modifications and provides certainty to how the medical loss ratio (MLR) is calculated. These modifications are based on public comments solicited in an earlier version of the rule published by CMS in the spring. The modifications made in the new rule (effective date of Jan. 1, 2012):
• Rather than having insurers send checks that could be taxed, workers in group health plans can receive rebates tax-free.
• The new regulation proposes that all consumers receive a notice, showing not just the amount of any rebate, but what the insurer’s MLR means regardless of whether there is a rebate, and how the insurer’s MLR has improved under the new law. In addition, data on the special types of plans, mini-meds and expatriate plans, will be publicly posted in the spring.
• The final rule makes only a minor change to a quality improvement definition to promote insurer improvements in defining or coding of medical conditions for a limited window of time.
• In 2011, so-called mini-med plans received a special circumstances adjustment to their MLR in the form of a multiplier of 2.0 for 2011. The final rule phases it down from 1.75 in 2012 to 1.5 in 2013 to 1.25 in 2014. Mini-med plans will be banned by the prohibition on annual limits in the Affordable Care Act starting in 2014.
• The final rule keeps the expatriate plan multiplier adjustment at 2.0 due to their unique structure. It also levels the playing field between nonprofit and for-profit insurers in states with premium taxes.
• CMS will accept comments on the process for providing rebates to group enrollees and reporting of rebates until Jan. 6, 2012.
For the full text of the final rule, go to:
https://s3.amazonaws.com/public-inspection.federalregister.gov/2011-31289.pdf.
For the full text of the Interim final rule, go to:
https://s3.amazonaws.com/public-inspection.federalregister.gov/2011-31291.pdf
