5 key rulings from final MLR requirements

The Centers for Medicare & Medicaid Services (CMS) published Wednesday the final ruling on medical loss ratio requirements under health reform law.

The entire ruling can be found in the Federal Register.

MLR rules took effect on Jan. 1, but final rules have made modifications based on public comments.

The MLR rules require health insurance companies spend at least 80 percent of consumers’ health insurance premiums on medical care, not income, overhead and marketing.

The International Foundation of Employee Benefit Plans have narrowed down five summaries based on the final CMS ruling:

  • Make the MLR rebate tax free: Rather than having insurers send checks that could be taxed, workers in group health plans can receive rebates in a way that is not taxable.
  • Increase transparency: Consistent with comments from consumer groups, the new regulation proposes that all consumers receive a notice, showing not just the amount of any rebate, but what the insurer’s MLR means regardless of whether there is a rebate, and how the insurer’s MLR has improved under the new law. In addition, data on the special types of plans, mini-meds and expatriate plans, will be publicly posted in the spring.
  • Keep strong policies on how MLR is calculated: The final rule makes only a minor change to a quality improvement definition to promote insurer improvements in defining or coding of medical conditions for a limited window of time.
  • Phase down the special circumstances adjustment for mini-med plans: In 2011, so-called mini-med plans received a special circumstances adjustment to their MLR in the form of a multiplier of 2.0 for 2011. The final rule phases it down from 1.75 in 2012 to 1.5 in 2013 to 1.25 in 2014. Mini-med plans will be banned by the prohibition on annual limits in the Affordable Care Act starting in 2014.
  • Recognize circumstances of special types of plans: The final rule, after reviewing data, keeps the expatriate plan multiplier adjustment at 2.0 due to their unique structure. It also levels the playing field between nonprofit and for-profit insurers in states with premium taxes.

The effective date of the rule is January 1, 2012.

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