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PPACA MLR Rules: What If the Insurer Paid Enough Claims?

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The Centers for Medicare & Medicaid Services (CMS) is trying to lighten the new medical loss ratio (MLR) rebate notice rules, officials say.

CMS officials have outlined new MLR rebate notice rules in a final rule set to appear in the Federal Register Wednesday.

Officials developed the rule, which will start to apply July 1, to implement a provision of the Patient Protection and Affordable Care Act of 2010 (PPACA).

PPACA opponents are fighting the act in Congress and at the Supreme Court.

Today, the minimum MLR requirements in the law require affected health coverage issuers to spend at least 85% of large group revenue and 80% of individual and small group revenue on health care and quality improvement efforts. Issuers that miss the PPACA minimum MLR targets will have to pay rebates.

In December 2011, CMS — an arm of the U.S. Department of Health and Human Services (HHS) — published a final rule explaining how the issuers that will have to pay rebates must meet their notice requirements.

CMS officials asked for comments about how they should handle issuers that will not have to pay rebates.

CMS received 56 public comments on the final rule and 11 more comments on a paperwork reduction notice posted in February.

Consumer groups told CMS they thought expanding notice requirements would give consumers important information. The groups asked CMS to require issuers to send notices that include their 2010 and 2011 MLR figures.

Health insurers and an employer group noted that the PPACA MLR rules only started to take effect in 2011, that comparisons with the 2010 MLR figures could be misleading, and that another part of PPACA already will require HHS to publish issuers’ MLR data on the Web.

“Expanding the notice of MLR information to all issuers would further the goals of improving transparency of health insurance markets, supporting more informed purchase decisions, and promoting competition and efficiency,” CMS officials say in a response to the comments. “At the same time, we appreciate the concerns about administrative costs.”

CMS officials ended up siding mainly with the health insurers and employer group.

Most coverage issuers that owe no rebates will have to send MLR notices, but only general notices explaining that the plans met the PPACA MLR targets, and only for 2011, officials say.

The notices “will not include the issuer’s MLR for the current or prior reporting year or other specific measures of issuer performance,” officials say. “Instead, the notice will help educate consumers about the MLR measures and direct them to the HHS Web site,, for information about issuers’ actual MLRs.”

Having all issuers send MLR notices for 2011 will help consumers learn how the rebate system works, and sending notices to consumers who are not getting the rebates may help those consumers understand why some people are getting the rebates and others are not, officials say.

The notice can be sent electronically, and the procedure described in the final rule does not apply to student health plans, limited-benefit medical plans or plans that cover expatriates, officials say.

Other disclosure rules already apply to the expat plans and the limited-benefit plans, or “mini-med” plans, officials say.

CMS also is exempting issuers without credible experience, such as an issuer with fewer than 1,000 covered lives. Regulators are classifying small, non-credible issuers as issuers without an MLR to report and are presuming that those plans meet or exceed the applicable MLR standard.

Officials are estimating the final rule procedure will apply to about 300 issuers, and that those issuers will spend about $10,000 each on sending out the general MLR notices.


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