"This artificial inflation of MLR often eliminates most, or in some cases even all, of the rebate owed to enrollees, regardless of how low enrollees' claims costs are relative to premiums those enrollees pay," CMS wrote.

Although consumer advocates such as the National Health Law Program say the policy changes are appropriate and necessary, insurers and providers have reservations. AHIP and the American Hospital Association both urged CMS to clarify that bonuses related to formal value-based arrangements can qualify. The American Medical Association also worries the policy change could add to physician burdens to earn incentive money.

CMS estimates the proposed change would increase rebates or reduce premiums for consumers by about $12 million a year. The agency said it can't say how often this maneuver has been used or how much consumers have lost out on rebates as a result, because examinations of MLR data haven't been finalized yet.

Along with ensuring that provider bonuses are based on patient outcomes, CMS also wants to stop insurers from using expenses not directly related to quality improvement to inflate their MLRs. Some insurers count expenses such as overhead, marketing, lobbying, office space, executives' salaries, company retreats and artwork as incurred claims, CMS wrote in the proposed rule. This proposal is unpopular with AHIP, which said in comments on the proposed rule that indirect expenses are necessary to help plans carry out quality initiatives.

If the rule is finalized, it could underscore the importance of collaboration between payers and providers, and accelerate adoption of value-based care among health systems, because they will have to share more information to insurers to satisfy their MLR requirements, said Jonathan Buck, a principal at Polsinelli who focuses on health law.