The Centers for Medicare & Medicaid Services (CMS), a department within the U.S. Department of Health and Human Services (HHS), released final rules on Friday May 11th requiring insurers to notify subscribers when the medical loss ratio (MLR) provision of the Affordable Care Act (ACA) is met or exceeded for spending on medical claims or quality improvements. The December 2011 interim final rule and final rule on MLR only required that notices be sent to policyholders when insurers did not meet the MLR requirements. The ACA requires both individual and small group plans to meet the MLR requirements by spending at least 80 percent of premiums on medical claims or quality improvements. Large plans are required to spend at least 85 percent. Beginning in August of 2012, insurers must refund the difference to consumers. The goal of the notice is to educate consumers regarding the MLR measures and to help consumers know that the majority of premium payments go towards health care, as opposed to advertising, executive bonuses, or administrative overhead costs. HHS said the rule is not expected to have an economic impact of more than $100 million a year.

The Center for Consumer Information and Insurance Oversight (CCIIO), a division of the Centers for Medicare and Medicaid Services (CMS) recently released a bulletin providing medical loss ratio (MLR) guidance. Section 2718 of the Public Health Service Act (PHS Act), as added by the Affordable Care Act (ACA), requires health insurance issuers to submit a MLR report to the Secretary. The PHS Act also requires issuers to provide a rebate to enrollees if the issuer’s MLR is less than the applicable percentage established in the PHS Act. The CCIIO bulletin covers the following topics:

• Applicability of the Medical Loss Ratio to Certain Types of Plans
• Employer Groups of One
• Counting Employees for Determining Market Size
• Individual Association Policies
• Offering Policyholders a “Premium Holiday”
• Reinsurance and Reporting
• Exchange User Fees
• States With a Higher Medical Loss Ratio Standard
• “Mini-Med” Experience – Application of the Adjustment
• Form of Rebate

CMS issued a final rule implementing MLR requirements and an interim final rule implementing MLR rebate requirements in December 2011.

The Obama administration denied Wisconsin's request for a waiver from the health law's medical loss ratio, but partially approved North Carolina's. These two decisions conclude the review the Department of Health and Human Service (HHS) has conducted of the 17 states that have requested a waiver from the law's requirement that individual market health plans spend at least 80 percent of premiums on medical care or give customers rebates. In total, HHS has rejected 10 requests (North Dakota, Delaware, Texas, Kansas, Oklahoma, Florida, Indiana, Louisiana, Michigan and Wisconsin) and approved modified applications from seven states (Maine, New Hampshire, Kentucky, Nevada, Iowa, Georgia and North Carolina). Wisconsin wanted a lower ratio of...

The U.S. Department of Health and Human Services (HHS) has issued an interim final rule (IFR), with public comment, on the medical loss ratio (MLR) requirement under the Affordable Care Act (ACA). Beginning in 2012, the ACA requires that health insurers spend at least 80% (in some cases 85%) of premiums on health care services, or be required to pay rebates to plan members. HHS issued both the rule itself as well as a separate IFR on the rebate requirements, each allowing for public comment. For more information on medical loss ratios, click here. An update to the previous brief is pending.

The National Association of Insurance Commissioners today adopted model regulations on medical loss ratios. The health reform law tasks the organization with recommending definitions and methodologies for calculating MLRs to the Department of Health and Human Services. In a statement, Secretary Kathleen Sebelius praised the NAIC recommendation as "reasonable, achievable for insurers and will help to ensure insurance premiums are, for the most part, supporting health benefits for consumers," and pledged to issue MLR regulations "in coming weeks."