Many news outlets are reporting on the break the administration plans to give to insurers. (See the Kaiser report here.) The break is expected to come in the form of an adjustment to the MLR calculations.
The Affordable Care Act (ACA) requires insurance carriers to maintain a certain medical loss ratio (MLR). The MLR requires carriers to spend a defined percentage of premium dollars collected on clinical services and healthcare quality improvement. If the percentage is not met, the carrier is required to rebate a portion of the premiums collected. The rebate is provided to the plan or plan sponsor (generally the employer), which is then responsible for distribution of the rebate to plan participants.
Currently, if a carrier fails to spend at least 85% of each premium dollar (80% in the small group market) on clinical services and healthcare quality improvement during the calendar year, a rebate must be provided to the plan or plan sponsor by August of the following year. The carriers are also required to provide notice of anticipated rebates to group policyholders and participants. In North Carolina, United Healthcare, Coventry and Cigna distributed rebates for the 2012 calendar year for some, but not all, products. BCBS of NC and Aetna did not issue rebates for the 2012 calendar year.
In a final rule issued on March 11, 2014 by the Department of Health & Human Services (HHS) (the Notice of Benefit and Payment Parameters for 2015), the administration informed of its intention to propose amendments to the MLR regulations in the future. Specifically, HHS “intend[s] to propose standardized methodologies to take into account the special circumstances of issuers associated with the initial open enrollment and other changes to the market in 2014, including incurred costs due to technical problems during the launch of the State and Federal Exchanges.” In plain English, this means that HHS intends to adjust downward the percentage of premium dollars that carriers are required to spend on clinical services and healthcare quality improvement to make up for the added administrative burden imposed upon carriers required to keep up with the delays due to the bumpy roll-out of the Exchange (aka Marketplace). The relief is expected to be only temporary, and it is unclear when the rules will be proposed.
