Employee Benefits Compliance

HHS Issues MLR Regulations & Guidance on State Exchanges

The Department of Health and Human Services (HHS) issued interim final regulations today to implement the “medical loss ratio” (MLR) provisions in the Affordable Care Act. The MLR provisions require health insurers to spend 80 to 85 percent of premiums received on direct care for patients and efforts to improve care quality, rather than on administrative costs (80 percent for individual and group plans of under 100 lives, 85 percent for groups over 100). These new regulations outline disclosure and reporting requirements, how insurance companies will calculate their medical loss ratio and provide rebates, and how adjustments could be made to the medical loss ratio standard to guard against market destabilization.

Beginning in 2011, the law requires that insurance companies publicly report how they spend premium dollars. Insurance companies that are not meeting the medical loss ratio standard noted above (80 or 85% on medical care and quality control) will be required to provide rebates to their consumers. Insurers will be required to make the first round of rebates to consumers in 2012.

As anticipated, the rules track with the recent recommendations of the National Association of Insurance Commissioners (NAIC). They implement the NAIC recommendations on deducting federal and state taxes from the MLR, and they allow “mini-med” plans to use a different calculation formula than other plans in 2011. They do not include an “agent/broker commission carve out.”

HHS Issues Guidance on State Exchanges

The Department of Health and Human Services (HHS) issued guidance today to help States and the Territories seeking to establish a Health Insurance Exchange (Exchange) under Section 1311(b) of the Affordable Care Act. HHS intends to issue regulations for public comment in 2011, and also to publish guidance over the next three years to provide additional information.

The guidance issued today briefly overviews what Exchanges are and then focuses on four main categories:
• Principles and priorities
• Outline of statutory requirements
• Clarifications and policy guidance
• Federal support for the establishment of State-based Exchanges

HHS defines an Exchange as “a mechanism for organizing the health insurance marketplace to help consumers and small businesses shop for coverage in a way that permits easy comparison of available plan options based on price, benefits and services, and quality. By pooling people together, reducing transaction costs, and increasing transparency, Exchanges create more efficient and competitive markets for individuals and small employers.”

HHS noted that the first Notice of Proposed Rulemaking (NPRM) is scheduled for publication in the spring of 2011 and will address many of the basic federal requirements outlined in the guidance issued today. Additional regulations are scheduled for publication later in 2011 and in 2012.

  • HHS page on Exchanges: click here