Medical Loss Ratio

The IFR provides guidance to fully insured health issuers regarding reporting and calculation of medical loss ratio and, where applicable, the criteria for when rebates are required.

• Individual and Small Group Market – 80%
• Large Group – 85%
• Special considerations for small plans, new plans, mini-med and expatriate plans are accounted for in the program

For the purposes of the requirement, small group will be defined as 1 to 50 total average employees based on the preceding calendar year, if a state's current definition of small group includes an upper limit of 50, unless the state elects to use 1 to 100, until 2016. After Jan. 1, 2016, small group will be defined as 1 to 100 total average employees. Large group will be determined based on the upper limit established by the small group rules.

Yes, there are special considerations accounted for in the regulations for small plans, new plans, mini-med and expatriate plans. Each of these has a process and criteria by which a change to the MLR may be accommodated, if they qualify, for a period of time as outlined under the Rule. Additionally, state insurance commissioners may apply for a waiver from MLR requirements for an individual market segment.

No. ERISA self-funded plans are not a health insurance issuer, as defined by the Rule.

January 1, 2011. Any rebates applicable to 2011 will be paid out August 2012.

Calculation is based on the incurred claims and the expenses for activities that improve health care quality divided by earned premium less federal and state taxes, licensing and regulatory fees and adjusted for receipts for risk adjustments, risk corridors, and reinsurance under The Affordable Care Act.

Activities that improve health care quality, increase the likelihood of desired health outcomes and are grounded in evidence-based medicine are to be included in medical costs for the medical loss ratio calculation.

Quality Improvement programs are designed to achieve the following goals:

• Improve health outcomes including an increased likelihood of desired outcomes compared to a baseline and reduced health disparities among specified populations;
• Prevent hospital readmissions;
• Improve patient safety and reduce medical errors, lower infection and mortality rates;
• Increase wellness and promote health activities; or
• Enhance the use of health care data to improve quality, transparency, and outcomes.

Examples of quality improvement activities include the following case and disease management and care coordination services:

• Arranging and managing transitions;
• Medication and care compliance;
• Programs to support shared decision-making with patients, their families and the patient's representatives;
• Use of medical homes (as defined in the Affordable Care Act);
• Nurseline (with some exceptions, see 24-hour hotline below);
• Comprehensive discharge planning;
• Prospective medical and drug utilization review;
• Certain wellness and health promotion activities (e.g. coaching and incentives);
• Fraud and abuse programs (the lesser of expenses and recoveries);
• Certain limited health technology (HIT) expenses.

Quality improvement activities must be designed to improve the quality of care received by an enrollee and be able to be objectively measured for producing verifiable results and achievements.

Activities designed primarily to control or contain costs are not to be reported as quality improvement. When calculating medical costs, the following items are not considered part of medical costs, and thus are administrative costs:

• HIPAA and ICD-10 implementation and administration costs However, insurers are to report these implementation costs for possible reconsideration by HHS.
• Cost containment expenses that do not otherwise meet quality improvement criteria set forth above, which may include:
• Retrospective and concurrent utilization review;
• Most fraud prevention activities (beyond those that recover incurred claims);
• Provider network contracting and management costs;
• Provider credentialing;
• Costs associated with calculating and administering enrollee/employee incentives.
• Clinical data collection without data analysis;
• Claims adjudication expenses;
• Marketing expenses;
• Broker commissions;
• 24-hour customer service or health professional hotlines that address non-clinical questions.

Yes. The Rule establishes a process for state insurance commissioners to request a waiver of the 80% MLR requirement when the insurance commissioner determines there is a "reasonable likelihood" that destabilization will occur when the MLR requirement is applied.

Only to the individual market.

In order to guard against credibility issues with the MLR calculations, the Affordable Care Act stipulates that the reporting requirements and methodologies for calculating the medical loss ratio "be designed to take into account the special circumstances of plans with a small membership, different types of plans, and new plans."

Insurers with less than 75,000 life years in a market segment in a state are considered partially credible and eligible for an adjustment. Issues with less than 1,000 life years in a market segment in a state are considered not credible and are exempt from the rebate requirement.

Insurers may defer experience on newly issued policies until the next MLR reporting year, if the newly issued policies account for half of the issuers total earned premium.

HHS will apply a methodological adjustment to the way the medical loss ratio is calculated for mini- med and expatriate plans for 2011. The methodological adjustment will address the unusual expense and premium structures of those plans, enabling their issuers to apply for an adjustment to reported medical claims and quality improvement expenses.

Because limited data is available to inform such an adjustment, this regulation requires accelerated reporting by issuers of mini-med and expatriate plans so that HHS may receive and review data on their expense structures and profitability.

To be determined.

These plans are required to provide early reporting to the Secretary if they claim such an adjustment. To improve transparency and ensure consumers understanding of the product purchased, HHS will require insurers that sell mini-med policies to provide prominent notice regarding the benefits and coverage provided by the policy.

Each health insurer must report to HHS, among other things, the premium earned, claims, quality improvement expenses and other non-claims costs incurred under health insurance that is in force during the calendar year. These reports must be by legal entity, state and line of business (individual, small group and large group).

Calendar year will be used for MLR reporting and rebate calculations.

For each MLR reporting year, an issuer must provide a rebate to each enrollee if the issuer's MLR does not meet or exceed the minimum MLR percentage required.

For the sole purpose of determining who is entitled to receive a rebate, the term "enrollee" means the subscriber, policyholder, and/or government entity that paid the premium for health care coverage received by an individual during the respective MLR reporting year.

An insurer may enter into an agreement with the group policyholder to distribute the rebate on behalf of the insurer. However all the following conditions must be met.

• The insurer must remain liable for complying with all of its obligations.
• The insurer must obtain and retain records and document accurate distribution of rebate.
• Records and documentation must include:
• Amount of the premium paid by each subscriber
• Amount of the premium paid by the group policyholder
• Amount of the rebate provided to each subscriber
• Amount of the rebate retained by the group policyholder
• Amount of any unclaimed rebate and how and when it was distributed.

The insurer must provide any rebate owed no later than August 1 following the end of the MLR reporting year.