Final medical loss ratio rule establishes notice requirements

While we're all waiting to see if the Patient Protection and Affordable Care Act (ACA) is deemed constitutional by the U.S. Supreme Court, the Department of Health and Human Services (HHS) is still churning out conforming regulations. The HHS has now published a final rule that amends the regulations implementing the medical loss ration (MLR) standards for health insurance issuers (see Federal Register Doc. 2012-11753, May 16, 2012).

According to Public Health Service Act (PHSA) Sec. 2718, as added by the ACA, insurers offering group or individual health insurance must report annually, to the HHS, on the percentage of health premiums used for claims reimbursement and must maintain certain minimum MLRs. If minimums are not maintained, rebates must be provided to health plan participants.

The final rule establishes notice requirements for issuers in the group and individual markets that meet or exceed the applicable MLR standard in the 2011 MLR reporting year. The MLR notice must be provided with the first plan document (for example, open enrollment materials) that is provided to enrollees on or after July 1, 2012.

On December 7, 2011, the Centers for Medicare and Medicaid Services (CMS) issued a final rule, with comment period, regarding the implementation of MLR rules for health plans under the ACA . The final rule required only that issuers that owed rebates as a result of not meeting the applicable MLR standard must provide a notice to policyholders. However, this meant that policyholders and subscribers of issuers meeting or exceeding the MLR standards would not receive MLR information. The HHS solicited comments about extending the notice requirement to include the issuers that met the MLR standard, to provide transparency in how premiums dollars are used, for all health care consumers.

Based on the comments received and weighing consumer transparency and competition gains with burden on issuers, the final rule establishes a simple, straightforward notice requirement for health insurance issuers that meet or exceed the MLR standards established by the ACA. The final rule only requires the notice for the 2011 MLR reporting year, the first year that the MLR rules are in effect, and does not require issuers to include information about the current or prior year MLR. The notice will direct enrollees to the HHS website, www.HealthCare.gov, for specific information about issuers' MLRs.

The notice must be prominently displayed in clear, conspicuous 14-point bold type on the front of the plan document, insurance policy or certificate, or as a separate notice. The MLR notice may be included in the same mailing as other mailed notices. Further, the notice may be provided electronically, consistent with the policy for providing the summary of benefits and coverage under PHSA Sec. 2715.

Health insurance issuers that sell plans with total annual benefit limits of $250,000 or less ("mini-med" plans) or expatriate policies are not required to provide MLR notices to policyholders and subscribers if they meet or exceed the applicable MLR standard.