HHS Adds New Medical Loss Ratio Reporting Requirement

The Department of Health and Human Services’ Centers for Medicare & Medicaid Services (CMS) has issued a final rule (pdf) that imposes a new reporting requirement on health insurance issuers in the group and individual markets that meet or exceed the applicable medical loss ratio (MLR) standard for the 2011 reporting year. The Affordable Care Act requires that health insurers, depending on the size of the insurance market, spend between 80 and 85% of premium revenue on reimbursement for clinical services or activities that improve health care quality, or provide a rebate to their enrollees. The law also imposes certain reporting requirements for insurers. Final regulations implementing the MLR requirement, including its application to mini-med plans and distribution of rebates to enrollees in group health plans, were issued in December 2011.

When the December MLR rule was released, the CMS requested comments as to whether an issuer that meets or exceeds the applicable MLR threshold would have to send a notice to policyholders and subscribers with information about the MLR standard and its own MLR as a performance measurement. In addition, the agency sought comments as to whether it would be useful to include information about the issuer’s MLR for the prior year in these notices. After reviewing comments submitted in response to this request – and reportedly weighing the interests of consumer transparency and competition with the issuer’s compliance burden – the CMS has determined that it would require issuers that meet or exceed the MLR standard to send a “simple, straightforward” notice to policyholders, but only for the 2011 reporting year. To this end, the rule establishes this basic notice requirement, and outlines the standard language that issuers will use to inform policyholders and subscribers of group health plans, and subscribers in the individual market, that the issuer has met the minimum MLR standard. The notice will not include the issuer’s MLR for the current or prior reporting years, nor will it need to include other specific measures of the issuer’s performance. An issuer must provide the notice with the first plan document that the issuer provides to enrollees on or after July 1, 2012.

Photo credit:  style-photographs