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House bill on ACA’s MLR requirement passes Energy and Commerce Committee

Posted on September 20, 2012 | No Comments

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H.R. 1206, sponsored by Representatives Mike Rogers and John Barrow, alters the Affordable Care Act’s (ACA’s) medical loss ratio (MLR) by excluding insurance brokers’ fees from counting as administrative costs under the ACA provision. MLR mandates that insurers spend at least 80 percent of premiums on medical care as opposed to administrative costs or profits. Nearly 13 million consumers recently received over one billion dollars in rebates on their health insurance premiums due to the MLR standard.

Today, the Committee voted 26-14 to pass the bill. Representative John Barrow was the only Democrat to support it.

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The Congressional Research Service (CRS) published a report which outlines three issues on which legislation and hearings regarding the Affordable Care Act's (ACA's) medical loss ratio (MLR) requirement have focused. The issues include broker commissions, high-deductible health plans (HDHPs), and special rules for nonprofit insurers. Under the MLR provision, individual and small group plans must spend at least 80 percent of premiums on medical benefits or activities to improve consumer health care quality. Large group plans must spend at least 85 percent. If plans do not meet this MLR requirement, they must refund the different to beneficiaries. In August 2012, insurance companies refunded $1.1 billion to approximately 12.8 million consumers for 2011, due to the ACA provision.
A new analysis from the Kaiser Family Foundation reports that consumers and businesses are expected to receive an estimated $1.3 billion by August 2012 in rebates from insurers who exceeded Affordable Care Act (ACA) limits on administrative expenses and profits. The rebates include...
One of the most visible consumer protections in the Affordable Care Act (ACA) is the requirement that health insurers pay out at least 80 percent to 85 percent of premium dollars for medical care expenses. Insurers that pay out less than this minimum “medical loss ratio” (MLR) must rebate the difference to their policyholders, starting in 2011. Using insurers’ MLR data from 2010, the Commonwealth Fund recently released an issue brief estimates the rebates expected in each state if the new rules had been in effect a year earlier. Nationally, consumers would have received almost $2 billion of rebates if the new MLR rules had been in effect in 2010. Almost $1 billion would be in the individual market, where rebates would go to 5.3 million people nationally. Another $1 billion would go to policies covering about 10 million people in the small- and large-group markets.
The Internal Revenue Service (IRS) recently published a notice giving health organizations another year to comply with the medical loss ratio (MLR) provision enacted by the Affordable Care Act (ACA). Under the MLR provision, Blue Cross Blue Shield organizations and others that meet certain tax code requirements could lose special tax treatment under Section 833 if the organization's MLR during the taxable year is not less than 85 percent. For purposes of Section 833, an organization's MLR is equal to the "percentage of total premium revenue expended on reimbursement for clinical services provided to enrollees under its policies during such taxable year." IRS plans to issue rules specific to MLR, but the industry needs more time to digest related final rules from the Department of Health and Human Services (HHS). Those rules were issued in December 2011. Comments on the notice are requested by September 10 of this year.
The Centers for Medicare & Medicaid Services (CMS), a department within the U.S. Department of Health and Human Services (HHS), released final rules on Friday May 11th requiring insurers to notify subscribers when the medical loss ratio (MLR) provision of the Affordable Care Act (ACA) is met or exceeded for spending on medical claims or quality improvements. The December 2011 interim final rule and final rule on MLR only required that notices be sent to policyholders when insurers did not meet the MLR requirements. The ACA requires both individual and small group plans to meet the MLR requirements by spending at least 80 percent of premiums on medical claims or quality improvements. Large plans are required to spend at least 85 percent. Beginning in August of 2012, insurers must refund the difference to consumers. The goal of the notice is to educate consumers regarding the MLR measures and to help consumers know that the majority of premium payments go towards health care, as opposed to advertising, executive bonuses, or administrative overhead costs. HHS said the rule is not expected to have an economic impact of more than $100 million a year.
The Center for Consumer Information and Insurance Oversight (CCIIO), a division of the Centers for Medicare and Medicaid Services (CMS) recently released a bulletin providing medical loss ratio (MLR) guidance. Section 2718 of the Public Health Service Act (PHS Act), as added by the Affordable Care Act (ACA), requires health insurance issuers to submit a MLR report to the Secretary. The PHS Act also requires issuers to provide a rebate to enrollees if the issuer’s MLR is less than the applicable percentage established in the PHS Act. The CCIIO bulletin covers the following topics:
  • Applicability of the Medical Loss Ratio to Certain Types of Plans
  • Employer Groups of One
  • Counting Employees for Determining Market Size
  • Individual Association Policies
  • Offering Policyholders a “Premium Holiday”
  • Reinsurance and Reporting
  • Exchange User Fees
  • States With a Higher Medical Loss Ratio Standard
  • “Mini-Med” Experience – Application of the Adjustment
  • Form of Rebate
CMS issued a final rule implementing MLR requirements and an interim final rule implementing MLR rebate requirements in December 2011.
The Obama administration denied Wisconsin's request for a waiver from the health law's medical loss ratio, but partially approved North Carolina's. These two decisions conclude the review the Department of Health and Human Service (HHS) has conducted of the 17 states that have requested a waiver from the law's requirement that individual market health plans spend at least 80 percent of premiums on medical care or give customers rebates. In total, HHS has rejected 10 requests (North Dakota, Delaware, Texas, Kansas, Oklahoma, Florida, Indiana, Louisiana, Michigan and Wisconsin) and approved modified applications from seven states (Maine, New Hampshire, Kentucky, Nevada, Iowa, Georgia and North Carolina). Wisconsin wanted a lower ratio of...
The U.S. Department of Health and Human Services (HHS) has issued an interim final rule (IFR), with public comment, on the medical loss ratio (MLR) requirement under the Affordable Care Act (ACA). Beginning in 2012, the ACA requires that health insurers spend at least 80% (in some cases 85%) of premiums on health care services, or be required to pay rebates to plan members. HHS issued both the rule itself as well as a separate IFR on the rebate requirements, each allowing for public comment. For more information on medical loss ratios, click here. An update to the previous brief is pending.
On May 11, 2012, the United States Department of Health and Human Services (HHS) issued a final rule that revises previous medical loss ratio (MLR) rules to establish consumer notification requirements with which insurers must comply when meeting applicable MLR requirements. In a previous December, 2011 final rule governing other aspects of the MLR amendments, HHS had required notification only when insurers did not ...
This is an updated version of a brief originally published on August 25, 2010. This brief is current as of November 22, 2010. A medical loss ratio (MLR) is the proportion of premium dollars that an insurer spends on health care services relative to health insurance premium paid by subscribers. Prior to the enactment of the health reform law, the federal government required Medicare supplemental insurance (or Medigap policies) to meet minimum federal loss ratio requirements, but did not establish federal standards to define how insurers should categorize losses, nor did those requirements apply to other types of private insurance policies.