Stay ahead of developments in federal and state health care law, regulation and transactions with timely, expert news and analysis.
By Sara Hansard
Jan. 6 --The Internal Revenue Service released final regulations Jan. 6 that prevent Blue Cross and Blue Shield health insurance plans from including quality improvement expenses when calculating whether they meet health-care spending requirements under the Affordable Care Act.
“The final regulations retain the rule in the proposed regulations because the alternative is not supported by the statute,” according to the final regulations (RIN 1545-BL05). The proposed regulations were issued in May 2013, and the Blue Cross and Blue Shield Association said in a comment letter in August that its health plans, which cover about 100 million Americans, should be able to include quality improvement activities as part of the medical loss ratio (MLR) requirement of the ACA . Blue Cross Blue Shield plans should be given the same treatment in allowing quality improvements to be part of their MLR as other plans, the association said.
The MLR requirement generally requires large group health plans to spend at least 85 percent of premiums on medical claims or quality improvement activities, or refund the difference to consumers. Nonprofit plans, however, receive benefits under the tax code that for-profit plans don't.
Section 833 of the Internal Revenue Code “provides that Blue Cross and Blue Shield organizations, and certain other qualifying health care organizations, are entitled to: (1) treatment as stock insurance companies; (2) a special deduction under section 833(b); and (3) computation of unearned premium reserves under section 832(b)(4) based on 100 percent, and not 80 percent, of unearned premiums,” the final regulations say.
The regulations were published Jan. 7 in the Federal Register (79 Fed. Reg. 755).
Blake Hutson, a senior associate for health reform campaigns in the Southwest office of Consumers Union in Austin, Texas, supported the IRS regulations. Consumers Union wrote in favor of the proposed rule in August.
“The IRS gave them four years of relief from this provision,” Hutson told Bloomberg BNA Jan. 6. Nonprofit Blue Cross Blue Shield plans “are meant to be consumer-focused nonprofit health plans,” he said. He said the regulations effectively apply primarily to Blue Cross Blue Shield plans more than other plans.
“They're still allowed 15 percent overhead, and we think that's more than adequate,” Hutson said. “We think the MLR at 85 percent is more than achievable for nonprofit health insurance plans,” he said. “The Affordable Care Act was clear that quality improvement expenses weren't to be included in the MLR calculation for these insurance companies that already receive special IRS tax treatment.”
To contact the reporter on this story: Sara Hansard in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Janey Cohen at email@example.com
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)