Employee Benefits Compliance, Medical Loss Ratio & Rebates

HHS Requires Insurers to Notify Policyholders even when MLR Standards are Met

On May 11, 2012, HHS issued final regulations  that require health insurers that meet or exceed Medical Loss Ratio (MLR) standards established by health care reform to issue a notice of MLR information to each policyholder and subscriber of a group health plan and to each subscriber in the individual market.  Prior final regulations on the notice requirements (issued in December 2011) applied only to insurers that owed rebates because they failed to meet the applicable MLR standards.
Note that the HHS rule does not require plan sponsors to forward notices to plan participants, but requires the insurer to send notices directly to subscribers.  The final rule provides specific language that must be used in the MLR notice provided by health insurers that meet or exceed the MLR standards:
  •  An explanation of the MLR standards under health care reform.
  • A statement that the insurer met or exceeded those standards for the applicable MLR reporting year.
The notice does not require issuers to include information about their current or prior year MLR, but instead directs the recipient to the website www.HealthCare.gov for information on the particular insurer’s MLR.  (The full text of the Notice is at the end of this Bulletin.)
This new notice requirement applies only for the 2011 MLR reporting year, but not for subsequent years. Insurers that fail to meet the MRL standard will be required to send notices in subsequent years as well. 
The final rule itself requires insurers to provide this notice “with the first plan document that the issuer provides to enrollees on or after July 1, 2012.”  It appears that HHS is using the term “plan document” to include any plan-related information the issuer sends, not just  the legal plan document. Thus, it seems that HHS expects insurers to send the MLR notice before January 2013, which is when the insurer is likely to send a new plan document for a calendar year plan. The preamble to the final rule cites “open enrollment materials” as an example of plan documents, notes that HHS is sensitive to issuers’ concerns about administrative costs and also says the MLR notice may be included in the same mailing as other mailed notices. 
Form and Appearance
The notice must be prominently displayed in clear, 14-point bold type, either on the front of the plan document or as a separate notice. Alternatively, the notice can be provided electronically if the electronic disclosure rules for providing summaries of benefits and coverage (SBCs) are satisfied.
The MLR notice requirement does not apply to the following policies, if they meet or exceed the applicable MLR standards:
  • Mini-med plans (that is, plans with total annual benefit limits of $250,000 or less).
  • Expatriate policies.
The MLR notice requirement also does not apply to:
  • Insurers of student health insurance coverage (because the MLR reporting and rebate requirements generally apply for experience beginning January 1, 2013
  • Insurers whose experience is non-credible, as defined under applicable regulations (i.e., issuer has fewer than 1,000 covered life-years and thus has insufficient data to determine whether MLR standard has been met).
The Actual Notice Language
Medical Loss Ratio Information—The Affordable Care Act requires health insurers in the individual and small group markets to spend at least 80 percent of the premiums they receive on health care services and activities to improve health care quality (in the large group market, this amount is 85 percent). This is referred to as the Medical Loss Ratio (MLR) rule or the 80/20 rule. If a health insurer does not spend at least 80 percent of the premiums it receives on health care services and activities to improve health care quality, the insurer must rebate the difference.
A health insurer’s Medical Loss Ratio is determined separately for each State’s individual, small group and large group markets in which the health insurer offers health insurance. In some States, health insurers must meet a higher or lower Medical Loss Ratio. No later than August 1, 2012, health insurers must send any rebates due for 2011 and information to employers and individuals regarding any rebates due for 2011.
“You are receiving this notice because your health insurer had a Medical Loss Ratio for 2011 that met or exceeded the required Medical Loss Ratio. For more information on Medical Loss Ratio and your health insurer’s Medical Loss Ratio, visit www.HealthCare.gov.”
(The Notices that must be provided by insurers who have not met the MLR standards were issued previously and are at http://www.cciio.cms.gov/resources/other/index.html#mlr )