Posted 12/02/11 on The Health Affairs Blog
On December 2, 2011, the Department of Health and Human Services released both a final rule and an interim final rule updating the medical loss ratio rule that it issued almost exactly a year ago. The Department of Labor simultaneously issued a technical release giving direction to employer-sponsored health plans governed by the Employee Retirement Income Security Act (ERISA) as to how to handle rebates provided by insurers who fail to meet the targets established under the MLR rule.
The MLR rule has been one of the most controversial provisions of the Affordable Care Act (ACA). The MLR provision of the Affordable Care Act (section 2718 of the Public Health Services Act) requires health insurers in the individual and small group market to spend 80 percent of their premiums, after subtracting taxes and regulatory fees (85 percent for large groups), on payment for medical services or on activities that improve health care quality. Insurers must report their medical loss ratios annually and insurers that fall short of the target must rebate to their enrollees an amount equal to the product of the difference between their actual medical ratio and the statutory target multiplied by their premium revenues. According to a recent Kaiser tracking poll, 60 percent of the public views the MLR concept favorably, although only 38 percent was aware that the provision is in the ACA.
Continue reading “Implementing Health Care Reform: Fine Tuning the Medical Loss Ratio Rules”