HHS unveils MLR rule

The Department of Health and Human Services today released its final medical loss ratio rule. According to an HHS press release, the rule will ensure that health insurance companies spend at least 80 percent of consumers' health insurance premiums on medical care rather than on income, overhead and marketing expenses. "If your insurance company doesn't spend enough of your premium dollars on medical care or quality improvement this year, they'll have to give you rebates next year," said CMS Acting Administrator Marilyn Tavenner, in the release . "This will bring costs down and give insurance companies the incentive to focus on what matters for patients – high quality health care."

Here's a summary of news coverage since the rule's release.

The Hill: "Insurance plans will soon have to give consumers more information about how their premium dollars are spent, even if the spending meets new federal requirements. The disclosure requirements were included in final regulations on the healthcare reform law's medical loss ratio (MLR) provision. The Health and Human Services Department finalized its MLR rules Friday" (Baker, 12/2).

Kaiser Health News: The rule "rebuffs a plea from insurance agents that fees paid to brokers and agents be excluded from the administrative cost limits imposed under the 2010 federal health law. That's key because under the health law, insurers must spend at least 80 percent of their premium revenue on medical care and quality improvement – or issue rebates to consumers. The target is 85 percent for large-group issuers. Brokers had lobbied hard to have their fees exempted from the calculation of administrative costs. ... But consumer advocates fought the move, saying commissions are clearly administrative costs and removing them would make it easier for insurers to avoid paying the required rebates to consumers. ... The Department of Health and Human Services did agree to phase out rather than abruptly halt special allowances for the administrative expenses of so-called "mini-med" plans that offer limited benefits to individuals or small groups" (Appleby, 12/2).

Politico Pro: "The HHS rule comes less than two weeks after the National Association of Insurance Commissioners, following a controversial vote that split the group, urged Congress and HHS to provide relief to agents and brokers, who say the MLR requirement is forcing cutbacks in their industry. ...
Expatriate policies sold to employees working outside the United States, however, are getting indefinite relief from the MLR rule. ... The rule, however, does not extend the limited ICD-10 exemption to claims adjudication or the cost of maintaining the new coding system, set to become effective in 2013. The final rule also includes a couple of major consumer-friendly provisions. Any rebates paid to consumers for failure to meet the MLR benchmarks will be tax-free. The rule also requires that insurers explain their MLR to consumers regardless of whether they have to pay out rebates" (Millman, 12/2).

Bloomberg: "Consumers won't have to pay taxes on rebates they get from health insurance plans that violate spending rules in President Barack Obama's 2010 overhaul, the U.S. said" (Wayne, 12/2).

You can read the full MLR final rule and a related interim rule or read the HHS fact sheet.

Note: An earlier version of this news alert referred to a recommendation by the National Association of Insurance Commissioners. This recommendation was actually a resolution that urged Congressional action related to specifics of the MLR calculation.