A National Association of Insurance Commissioners (NAIC) panel is debating how to treat reinsurance arrangements in medical loss ratio calculations.
The Patient Protection and Affordable Care Act (PPACA), part of the federal Affordable Care Act package, will require the MLR, or percentage of health coverage premium revenue spent on health care and quality improvement efforts, to be at least 80% for individual and small group health coverage and 85% for large group coverage.
If administrative costs are too high, insurers or plans are supposed to provide rebates.
The PPACA Actuarial Subgroup at the NAIC’s Accident and Health Working Group has been developing the detailed definitions needed to implement the minimum MLR provisions.
The subgroup recently posted a draft describing a number of minimum MLR issues on its section of the website of the NAIC, Kansas City, Mo.
Some of the questions under consideration have been treatment of new business, procedures for handling the experience of multi-state employers, and whether “grandfathered” plans that stay exempt from some PPACA rules should be separated from non-grandfathered plans for purposes of rebate calculations.
The subgroup also has been talking about reinsurance. Questions have included, “Should incurred claims and earned premiums used in the calculation of medical loss ratio for rebate calculations be on a net of reinsurance basis?” and “How should payments or receipts for risk adjustment, risk corridors and reinsurance be reflected in the MLR calculation?”