Federal officials are requiring health plans to give consumers more information about how they are spending their premium dollars.
In a final rule released on Dec. 2, the Health and Human Services department made changes to its existing regulations governing health plans’ medical-loss ratio (MLR). Under the Affordable Care Act, health plans must spend at least 80% of their premium dollars on medical care and quality improvement activities. For large group plans, the threshold is 85%. If plans spend more than the allowed amount on other costs, such as overhead and marketing, they must provide rebates to consumers. The MLR requirements went into effect in January 2011 and the first rebate checks are scheduled to reach consumers in 2012.
The new rule requires that health plans notify their members of their MLR, even if they are not eligible for a rebate. Under the new notice provision, plans are also required to explain how their MLR has improved since the passage of the Affordable Care Act.
HHS is also instructing health plans to provide the rebates in ways that are not taxable, such as through lower premiums. And even though rebates go to the group policyholder, which is often an employer, health plans must provide information about the MLR and any associated rebates to all enrollees in the plan.
The final rule also makes technical changes in how the MLR is calculated. For example, health plans will be allowed to count some of the cost of ICD-10 conversion as quality improvement. The rule allows conversion costs of up to 0.3% of the earned premium to be considered a quality improvement activity during the 2012 and 2013 reporting years.