Medical Loss Ratio Overview

This week we bring you an overview of new Medical Loss Ratio reporting requirements, part of the Patient Protection and Affordable Care Act (PPACA). Beginning in January 2011, health plans that fail to meet the minimum requirements will have to issue rebates to members based on the difference between the minimum standard medical loss ratio and actual cost experience. The minimum standards are:

• 85% for products in large group markets (100+ employees)
• 80% for coverage in small group markets (<100 employees)

Reporting will begin for calendar year 2010, with 2010 reporting due by April 2011. Minimum requirements apply to insured plans (including grandfathered plans), but not to self-funded plans. Insurers will be able to consider expenditures on activities that improve health care quality as medical expenses into their reporting as well.

But there is still a good amount we don't know yet. The final definitions of administrative costs and accounting rules have not been decided. Items that improve health, like disease management and health coaching, are allowable but not well defined. Other items, like outcomes measurement, fraud and abuse expenses, and provider credentialing fees, are also in flux. The rebates that are to be distributed also need additional clarification.