(Bloomberg) — In the first major overhaul in more than a decade, the U.S. has proposed new rules for private health insurers who run Medicaid and children’s health plans covering millions of people.
The proposed rules, issued Tuesday by the Centers for Medicare & Medicaid Services (CMS), call for plans to report what portion of the money they’re paid actually gets spent on health benefits, and say states should take that into account when setting rates. The proposed guidance would also have states set standards for access to doctors and hospitals, and create a ratings system for plans.
The last major update for Medicaid managed care plans was in 2003. Since then, Medicaid, which covers the poor, and the Children’s Health Insurance Program (CHIP) have expanded, in large part because of 2010’s Patient Protection and Affordable Care Act (PPACA). Managed-care firms have also taken on a bigger role, and cover more than half of beneficiaries.
Managed care “has evolved into the dominant delivery system in Medicaid,” Vikki Wachino, director of the Center for Medicaid and CHIP Services, said on a conference call Tuesday. “We aimed to better align Medicaid managed care policies and best practices with those of other managed care programs.”
Big health insurers like Aetna Inc. (NYSE:AET), Humana Inc. (NYSE:HUM), Anthem Inc. (NYSE:ANTM), and UnitedHealth Group Inc. (NYSE:UNH) offer the Medicaid plans, as do specialized firms such as Molina Healthcare Inc. (NYSE:MOH), Centene Corp. (NYSE:CNC), WellCare Health Plans Inc. (NYSE:WCG) and Health Net Inc. (NYSE:HNT).
The rules call for managed Medicaid plans to report their medical loss ratio (MLR) and spend at least 85 percent of their revenue on benefits.
“That is the provision that’s more impactful to the plans directly,” said Lindy Hinman, senior vice president at Avalere Health. “It’s intended to cap the amount you can spend on administrative costs.”