HHS Releases Notice Rules for Insurers That Meet or Exceed Medical Loss Ratio Standards | Practical Law

HHS Releases Notice Rules for Insurers That Meet or Exceed Medical Loss Ratio Standards | Practical Law

On May 11, 2012, the Department of Health and Human Services (HHS) issued final regulations that expand the notice requirements involving medical loss ratio (MLR) standards established under the Affordable Care Act (ACA). The notice requirements now extend to health insurers that meet or exceed the applicable MLR.

HHS Releases Notice Rules for Insurers That Meet or Exceed Medical Loss Ratio Standards

by PLC Employee Benefits & Executive Compensation
Published on 15 May 2012 • USA (National/Federal)
On May 11, 2012, the Department of Health and Human Services (HHS) issued final regulations that expand the notice requirements involving medical loss ratio (MLR) standards established under the Affordable Care Act (ACA). The notice requirements now extend to health insurers that meet or exceed the applicable MLR.
Under the Affordable Care Act (ACA), health insurers that offer group or individual coverage must:
  • Report to HHS on how they spend premiums dollars.
  • Provide rebates to enrollees if the insurer's spending does not satisfy certain medical loss ratio (MLR) standards.
Under the MLR rules, insurers must provide rebates if their spending for policyholders on reimbursement for clinical services and health care quality improvement, in relation to the premiums charged, is less than:
  • 80% for insurers in the individual and small group markets.
  • 85% in the large group markets.
In December 2011, HHS issued final regulations that included notice requirements applicable only to include insurers that owed rebates because they failed to meet the applicable MLR standards. On May 11, 2012, HHS published final regulations that extend the MLR requirements to health insurers that meet or exceed MLR standards. The extended notice requirement applies only for the 2011 MLR reporting year. Notices must be provided to each policyholder and subscriber of a group health plan. Under applicable regulations, a "subscriber" is the individual (generally the employee):
  • Whose eligibility is the basis for the enrollment in the group health plan.
  • Who is responsible for the payment of premiums.
The May 2012 final regulations include a three-paragraph statement that:
  • Must be used to satisfy the notice requirement.
  • Informs enrollees that the insurer met or exceeded the applicable MLR standard.
Insurers must provide this notice with the first plan document that the insurer provides to plan enrollees on or after July 1, 2012. This timing is intended to align with the rules for providing any MLR rebates and accompanying notice of rebates. Under applicable regulations, insurers must provide any rebates owed to individuals by August 1 of the year following the end of the MLR reporting year.
The notice must be prominently displayed in clear, 14-point bold type on either 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 (for more information on the SBC requirements, see Practice Note, Summaries of Benefits and Coverage under the ACA).
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:
In a related development, HHS issued correcting amendments that make technical and clarifying changes to interim final regulations and additional guidance published in December 2010 addressing MLR requirements. Among other things, the correcting amendments revise preamble language to clarify how small group and large group markets are determined for purposes of the MLR rules.

Practical Implications

The extended notice requirement will hopefully reduce confusion that may have otherwise occurred when some individuals received rebates and others, in different insurance plans, did not. Importantly, the electronic disclosure rules for providing SBCs, which are referenced in the extended notice requirements for MLRs, were recently addressed in DOL frequently-asked-questions (see Legal Update, DOL FAQs on SBCs Address Electronic Distribution and Coverage Example Calculator). For more information on the MLR standards under the ACA, see Practice Note, Affordable Care Act (ACA) Overview.