Deadline Looming for Medical Loss Ratio Rules
Deadline Looming for Medical Loss Ratio Rules Provided by the Affordable Care Act
The Patient Protection and Affordable Care Act (Pub. L. 111–148) was enacted on March 23, 2010; the Health Care and Education Reconciliation Act (Pub. L. 111–152) was enacted on March 30, 2010 and collectively they comprise the “Affordable Care Act” (Act). The Affordable Care Act, in addition to making changes to Public Health Service Act (PHS Act) directs the Department of Health and Human Services (DHHS) to establish rules related to allowable Medical Loss Ratios for group health plans and health insurance issuers in the group and individual markets as well as what have been dubbed “Mini Meds” which are plans with $250,000 or less in annual benefits. The actions by DHHS to date regarding MLR include:
- Request for information related to MLR was published in the Federal Register on April 14, 2010
- Interim Final Rule was published on December 10, 2010 with a 60 day comment period
- Technical corrections made to the Interim Final Rule December 30, 2010
- And now, the Final Rule scheduled for publication in the Federal Register on December 7, 2011.
According to the provisions of the Final Rule, insurers must spend at least 80 percent of premiums on medical care (85% for large group insurers) and if unsuccessful in meeting this target must provide a vehicle for issuing rebates to consumers. The “Mini-Meds” are treated differently and the MLR for those is slowly adjusted, however many believe that after 2014, when health care exchanges required by the Act are in full effect, the Mini-Med insurers will no longer be allowed.
The Department of Health and Human Services has received approximately 90 responses to the Interim Rule and provides for continued public comment on the Final Rule until January 6, 2012. The amendments covered by the rule are applicable January 1, 2012.
The Medical Loss Ratio provisions have been the focus of much speculation as debate occurs around the effect this requirement will have on the insurance industry. Some speculate that such a narrow margin could force many insurers into a very difficult financial position, while others contend that premiums do not account for all of an insurer’s income and as such rates can be adjusted so a certain reserve of liquid assets are achieved. These assets can be used to generate income not unlike any other investment institution.
Anyone wishing to comment on the Final Rule should do so by January 6th, 2012.