The Department of Health and Human Services’ Centers for Medicare & Medicaid Services (HHS) has issued a final rule (Final Rule) regarding the Affordable Care Act’s medical loss ratio (MLR) requirements. The MLR requirement is intended to reduce the portion of consumers’ premium dollars that health insurance issuers spend on administrative costs and profits. Specifically, the new health care law mandates that health insurance companies in the individual and small group markets are required to spend at least 80% of premium dollars on medical care and health care quality improvement. In the large group market, health insurance issuers are required to spend at least 85% of premium dollars on medical care and health care quality improvement. If they fail to do so, health insurers must rebate the difference to their customers starting in 2012.
HHS published interim final regulations on the MLR requirement on December 1, 2010. Most notably, the Final Rule changes the process for distributing rebates to enrollees in group health plans and requires issuers to provide notice about the rebate to consumers. The Department of Labor (DOL) simultaneously published a technical release3 providing direction to employersponsored health plans governed by the Employee Retirement Income Security Act (ERISA) on how to handle the rebates from insurers who fail to meet MLR minimum standards. In addition, the Final Rule modifies the MLR calculation for “mini-med” and expatriate health plans and the treatment of ICD-10 conversion costs, fraud reduction expenses and community benefit expenditures.
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