Medical Loss Ratio (MLR) Interim Final Regulations Announced
Cigna Perspective on the Ruling
At Cigna, we continue to support the objectives of health care reform. We expected these interim final regulations. Cigna is less impacted by MLR than our competitors because we are more diversified and a smaller percentage of our business is insured.
We fully embrace the goals of improving the quality of health care and providing transparency in an effort to reduce health care costs. We look forward to working collaboratively with national leaders to improve the quality and cost of health care.
Cigna will continue advocating on behalf of our clients, benefit advisor partners and customers. We also encourage your voices to be heard. Please contact your Cigna sales representative if we can assist.
November 23, 2010
On November 22, 2010, the Departments of Treasury, Labor, and Health and Human Services jointly announced Interim Final Regulations for the Patient Protection and Affordable Care Act’s (PPACA) Medical Loss Ratio (MLR) provision.
The provision states that beginning in 2011, insurers and HMOs must annually calculate their MLR and provide rebates to policyholders if their MLR (percent of premium revenue spent on claims/medical care) is less than 85 percent for large groups and 80 percent for small groups or individuals.
MLR applies to insured plans only, regardless of grandfathered status.
Largely, the regulations are consistent with recent recommendations from the National Association of Insurance Commissioners (NAIC).
General highlights of the regulations include:
- MLR rebates will be sent to policyholders, which include employers or employee organizations as well as individual plan policyholders.
- Insurers may distribute rebates to employers; in turn, employers would need to issue rebates to employees, based on employee contributions.
- Policyholders are potentially eligible for a rebate determined on a “block” basis. The “block” is defined by:
- Organization size (individual; small or large employer group)
- Legal entity issuing coverage
- State of issuance
- Limited medical and expatriate international plans handled separately
- Small group is defined as 2-50 employees - unless a state defines it differently - until at least 2016.
- For the 2011 reporting year, issuers of limited medical (“mini-med”) and expatriate international plans are subject to separate calculation rules.
- The plan’s numerator of the total claims incurred and expenditures for activities that improve health care quality would be multiplied by two.
- Carriers will be required to complete additional quarterly reporting through 2011.
- After reviewing this additional reporting, these adjustments will be revisited by the Secretary for 2012 and beyond.
- Broker commissions will be included in the MLR calculation.
- Non-U.S. insurance companies do not file MLR.
These are Interim Final Regulations from the Department of Health and Human Services (HHS). There will be a 60-day comment period. Final regulations may differ. As additional clarification is made available whether through rule-making or otherwise, we’ll share updates.
For More Information
The official news release can be found at: http://www.hhs.gov/news/press/2010pres/11/20101122a.html.
Please also visit www.InformedonReform.com, Cigna's Health Care Reform website.
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