HHS Finalizes Requirement to Notify Consumers When MLR Spending Targets Met

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Final Rule on MLR Consumer Notification


Key Development: HHS issues final rule requiring insurers to notify policyholders when medical loss ratio requirement of health reform law is met.

Industry Response: Requiring notices to be sent when the MLR is met defeats the purpose of the requirement and could confuse consumers.

By Sara Hansard  

The Department of Health and Human Services May 11 issued a final rule requiring health insurers to send subscribers annual notices when the insurers meet or exceed requirements in the health reform law for spending on medical claims or quality improvements.

The final rule (CMS-9998-F), scheduled to be published in the May 16 Federal Register, amends regulations implementing the medical loss ratio requirement of the Patient Protection and Affordable Care Act to establish the notice requirements for issuers in the group and individual markets that meet or exceed the MLR standard in the 2011 MLR reporting year.

In December 2011, HHS issued an interim final rule and a final rule on the MLR (see previous article). The final rule only required that notices be sent to policyholders when insurers did not meet the MLR.

While insurers had argued that a requirement to send notices to policyholders if the MLR is met will add administrative costs and would potentially confuse consumers, Department of Health and Human Services Secretary Kathleen Sebelius said in a blog to consumers posted May 11, “If your insurance company is providing fair value for your premium dollars, you should know that.”

In an attempt to give consumers better value for insurance premiums, PPACA requires individual and small group plans to meet the MLR standard by spending at least 80 percent of premiums on medical claims or quality improvements, and large plans to spend at least 85 percent. Plans that do not meet the thresholds must refund the difference to consumers beginning Aug. 1, 2012, for 2011. The Kaiser Family Foundation April 26 estimated that $1.3 billion in rebates will be paid for 2011 (see previous article).

Help Educate Consumers.

The final rule said that requiring the notices to be sent when MLRs are met “will ensure that all consumers, not just those owed a rebate, are informed whether their issuer meets the minimum MLR standards established by the Affordable Care Act,” and it will “reduce confusion as to why certain individuals receive rebates, while others, such as coworkers or family members with different plans, do not.”

To address the issue of administrative costs in sending the notices, HHS added a new requirement that the notices use standard language to inform policyholders in the group and individual markets if plans meet or exceed the MLR standard. The notices do not have to include the issuer's MLR for the current or prior year or other specific measures of issuer performance, HHS said in the final rule.


“When we pay for health insurance, we want to know that most of what we are paying for is for health care, not advertising, executive bonuses or overhead.”  



--HHS Secretary Kathleen Sebelius

The notice “will help educate consumers about the MLR measures and direct them to the HHS web site, HealthCare.gov, for information about issuers' actual MLRs,” it said.

HHS said the rule is not expected to have an economic impact of more than $100 million a year.

Insurers' Response.

“The mandatory notices to policyholders receiving rebates ignores the real drivers of rising premiums and does not account for many of the consumer services health plans have implemented, such as fraud prevention, that are considered administrative costs under this requirement,” Robert Zirkelbach, spokesman for America's Health Insurance Plans, told BNA in an email. AHIP represents about 1,300 health insurers covering about 200 million people.

There are also provisions in PPACA that will cause premium increases that “far exceed the value of prospective rebates,” Zirkelbach said.

“The process for providing notices to policyholders not receiving rebates has been improved, but we remain concerned that sending these notices is unnecessary and could increase administrative costs--the opposite of what the MLR is intended to achieve,” he said.

In instructions posted on an HHS website, the department said that notices of MLR information “must be provided by August 1 of the year following the MLR reporting year for which the rebate is being issued. For example, Notices of rebates based on the 2011 MLR reporting year must be provided by August 1, 2012.”

Savings Cited.

The Obama administration also said the MLR has resulted in lowering premiums. In her blog, “Guaranteeing Value for Your Premium Dollars,” Sebelius said that if consumers do not receive rebates, “that means your plan may have lowered prices or improved your coverage already.”

Sebelius cited as an example Highmark Blue Cross Blue Shield of West Virginia lowering premiums by an average of $2,500 for 4,200 small businesses in 2011 to improve its MLR.

“When we pay for health insurance, we want to know that most of what we are paying for is for health care, not advertising, executive bonuses or overhead,” Sebelius said in the blog.

By Sara Hansard  

The final medical loss ratio rule is at http://op.bna.com/hl.nsf/r?Open=bbrk-8u7s9h. Sebelius's blog is at http://www.healthcare.gov/blog/2012/05/medicallossratio051112.html. The instructions on MLR information are at http://cciio.cms.gov/resources/files/mlr-rebate-notice-instructions.pdf.

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