Members of the Life and Health Actuarial Task Force (LHATF) have approved a draft model that could be used to implement the new Affordable Care Act minimum medical loss ratio (MLR) provisions.
The proposed model, which would serve as a template for creating a Regulation for Uniform Definitions and Standardized Rebate Calculation Methodology for Plan Years 2011, 2012 and 2013, would help states implement provisions in the Patient Protection and Affordable Care Act (PPACA), an Affordable Care Act component, that will require that the minimum amount of health coverage revenue going to medical care and quality improvement efforts be 80% for individual and small group coverage and 85% for large group coverage.
Carriers that fail to spend enough revenue on health care and quality improvement are supposed to send rebates to customers.
Regulators and interest groups have engaged in vigorous debate about the precise definitions to be used in the minimum MLR model.
One term that has been the subject of intense scrutiny has been “taxes.”
In the draft approved by the LHATF, a panel at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., drafters say the phrase “Federal and State taxes and licensing or regulatory fees” refers to “those taxes and licensing or regulatory fees as defined in Appendix C and derived from the NAIC Supplemental Health Care Exhibit as adopted by the
National Association of Insurance Commissioners on August 17, 2010.”
Insurers and others also have asked for flexibility when it comes to deciding how to divide and combine various kinds of experience when calculating loss ratios.
The drafts says rebates should be “calculated at the licensed entity level within a state, with experience allocated to states based on the situs of the contract, except that for individual business sold through an association, the allocation shall be based on the issue state of the certificate of coverage and for employer business issued through a group trust, the allocation shall be based on the location of the employer.”
Experience figures also should be divided into experience figures for individual health plans, small group health plans and large group health plans, drafters say.
A state can decide to have a carrier merge data for the individual and small group markets, and, if that is the case, the licensed-entity-level figures should be broken down into data for large group plans and for individual and small group plans, drafters say.
The NAIC’s Health Insurance and Managed Care Committee is reviewing the draft and has posted it on its own section of the NAIC website. Comments are due Oct. 11.