It’s safe to say that the medical loss ratio provisions in the Patient Protection and Affordable Care Act are among the least favored facets of the law, at least by benefit brokers.
This summer, a bipartisan bill that would separate broker compensation from the MLR rules in the legislation won plenty of praise from brokers and agents who have argued that the law’s provision is threatening their livelihood.
The Access to Professional Health Insurance Advisors Act — H.R. 2328 — was introduced by Reps. Mike Rogers, R-Mich., and John Barrow, D-Ga.
The Independent Insurance Agents & Brokers of America said the bill would “preserve consumer access to agents and brokers.”
“Since going into effect more than two years ago, the MLR regulations have had a detrimental impact on agents and brokers,” Charles Symington, IIABA senior vice president for external and government affairs, said in a statement.
This BenefitsPro story is excerpted from:
The legislation would provide “much needed relief to health agents and brokers across the country” by clarifying that agent compensation is not an insurance company administrative expense.
Now, whether the legislation actually gets anywhere is the big question. Congress recently returned from its summer recess, but mostly it’s been occupied by Syria, the budget and bigger issues than the MLR.
Here, the answers to seven critical questions to help you understand the ins and outs of the MLR provisions of the PPACA:
1. What are the health reform provisions relating to reducing the cost of health insurance?
Health reform added PHSA Section 2718 entitled “Bringing Down Cost Of Health Care Coverage.” The purpose of the law is to limit the amount insurers can spend on administrative costs. If an insurer exceeds the limit, it is required to rebate the excess. The medical loss ratio (MLR) is the cost of claims plus amounts expended on health care quality improvement as a percentage of total premiums, excluding taxes, fees, and adjustments for risk adjustments and risk corridors, as well as reinsurance.
Health care reform’s Medical Loss Ratio rules became effective Jan. 1, 2011, and the first rebates were required to be issued on Aug. 1, 2012. These rules apply to individual insurance policies and insured group plans but not self-insured health plans. Insurers must provide rebates (refunds) if their percentage of premiums spent on medical claims (and quality improvement) for policies issued in a state is less than 80 percent in the small group and individual markets or 85 percent in the large group market.
Until 2014, the rebate is to be calculated using the figures for the reporting year. Beginning on Jan. 1, 2014, the calculation to determine rebate amounts will be based on the average ratio over the previous three years. Notices of rebates must be sent to both plan sponsors and participants in the plan to which the rebate relates.
Rebates must be paid by Aug. 1 of the year following the year for which the medical loss ratio (MLR) data are calculated. Insurers must also report how the rebate was calculated. Insurers who fail to comply with the law are subject to civil fines to be assessed by HHS up to $100 per day per individual affected by the violation.
2. How may the insurance company rebates be paid to persons (“enrollees”) purchasing individual policies in the individual market?
For current individual policy owners, insurers may issue rebates in the form of either a premium credit, a reduction in the premium, or a lump-sum payment. For former individual policy owners, only a lump-sum payment is permitted. If an insurer finds that its MLR is lower than the standard required during an MLR reporting year, it may also institute a premium holiday to avoid paying rebates, but only if permitted under state law. An insurer seeking to suspend or reduce premiums must obtain permission from the governing state agency and do so in a non-discriminatory manner. An “enrollee” for rebate purposes is the policyholder or government entity that paid the premium for healthcare coverage received by an individual during the respective MLR reporting year.