II 

113TH CONGRESS 

1ST SESSION S. 1787 

To require a medical loss ratio of 85 percent for Medicaid managed care 

plans, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

DECEMBER 10, 2013 

Mr. ROCKEFELLER introduced the following bill; which was read twice and 

referred to the Committee on Finance 

A BILL 

To require a medical loss ratio of 85 percent for Medicaid 

managed care plans, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Medicaid Managed 

5 Care Responsibility and Equity Act’’. 

6 SEC. 2. MINIMUM MEDICAL LOSS RATIO REQUIREMENTS 

7 FOR MEDICAID AND CHIP MANAGED CARE 

8 PLANS. 

9 (a) MINIMUM MEDICAL LOSS RATIO REQUIREMENTS

10 FOR MEDICAID AND CHIP MANAGED CARE PLANS.—SecVerDate Mar 15 2010 00:51 Dec 11, 2013 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1787.IS S1787

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1 tion 1903(m) of the Social Security Act (42 U.S.C. 

2 1396b(m)) is amended— 

3 (1) in paragraph (2)(A)— 

4 (A) by striking ‘‘and’’ at the end of clause 

5 (xii); 

6 (B) by realigning the left margin of clause 

7 (xiii) so as to align with the left margin of 

8 clause (xii) and by striking the period at the 

9 end of clause (xiii) and inserting ‘‘; and’’; and 

10 (C) by adding at the end the following new 

11 clause: 

12 ‘‘(xiv) such contract provides that if the Sec13 retary determines for a contract year (beginning on 

14 or after October 1, 2017) that the entity has failed 

15 to have a medical loss ratio, as determined in ac16 cordance with paragraph (3), of at least .85 (.80 in 

17 the case of an entity in which at least 10 percent of 

18 the individuals enrolled in the plan are optional tar19 geted low-income children described in section 

20 1905(u)(2)(B))— 

21 ‘‘(I) the entity shall remit (not later than 

22 January 1 of the first calendar year that begins 

23 on or after the first day of the contract year) 

24 to the State an amount equal to the product of 

25 the total revenue of the entity under the State 


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1 plan under this title (or under a waiver of such 

2 plan) for the contract year and the difference 

3 between .85 (or .80, if applicable) and the med4 ical loss ratio (as so determined) and that any 

5 such remittances paid by an entity shall be 

6 treated as an overpayment under section 

7 1903(d)(3)(A); 

8 ‘‘(II) for 3 consecutive contract years, the 

9 State shall not permit the enrollment of new en10 rollees with the entity for coverage during the 

11 second succeeding contract year; and 

12 ‘‘(III) the State shall terminate the con13 tract if the entity fails to have such a medical 

14 loss ratio for 5 consecutive contract years.’’; 

15 and 

16 (2) by inserting after paragraph (2), the fol17 lowing: 

18 ‘‘(3)(A) For purposes of paragraph (2)(A)(xiv), the 

19 medical loss ratio for an entity with a contract under this 

20 subsection shall be equal to the ratio of— 

21 ‘‘(i) the sum of the amount of contract revenue 

22 (as determined in accordance with subparagraph 

23 (B)) expended by the entity— 

24 ‘‘(I) for providing medical assistance to in25 dividuals who are eligible under the State plan 


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1 under this title or under a waiver of such plan 

2 and who are enrolled with the entity; and 

3 ‘‘(II) for quality improvement activities (as 

4 determined in accordance with subparagraph 

5 (C)); to 

6 ‘‘(ii) the total amount of contract revenue (as 

7 determined in accordance with subparagraph (B)). 

8 ‘‘(B) For purposes of subparagraph (A), the Sec9 retary shall by regulation specify how contract revenue 

10 shall be determined with respect to an entity with a con11 tract with the State under this subsection and a contract 

12 year. The regulations shall provide that the following shall 

13 be disregarded from the determination of contract revenue 

14 for a contract year: 

15 ‘‘(i)(I) Only in the case of an entity that is ex16 empt from Federal income tax, community benefit 

17 expenditures made by the entity (not to exceed the 

18 limit described in subclause (II)) and reserve funds 

19 (not to exceed the limit described in subclause (IV)). 

20 ‘‘(II) The limit described in this subclause is 

21 the amount equal to 3 percent of the contract rev22 enue for the contract year or the amount equal to 

23 the product of the highest premium tax rate in the 

24 State and the contract revenue, whichever is greater. 


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1 ‘‘(III) In this clause, the term ‘community ben2 efit expenditures’ means expenditures for activities 

3 or programs that seek to achieve the objectives of 

4 improving access to health services, enhancing public 

5 health, and relieving government burden. 

6 ‘‘(IV) The limit described in this subclause is 

7 the amount equal to 3 percent of the contract rev8 enue for the contract year except that an entity that 

9 is exempt from Federal income tax may increase the 

10 amount of reserve funds to be disregarded for a con11 tract year up to a limit that does not exceed the 

12 amount equal to the sum of 3 percent of the con13 tract revenue for the contract year and the total 

14 amount of the reserve funds disregarded for the 2 

15 preceding contract years or 9 percent of the contract 

16 revenues during such 3-year period, whichever is 

17 greater. 

18 ‘‘(ii) Expenditures for providing medical assist19 ance to a new beneficiary population enrolled with 

20 the entity for the first 2 contract years of such pop21 ulation’s enrollment. 

22 ‘‘(C)(i) For purposes of subparagraph (A), quality 

23 improvement activities are activities designed to do any 

24 of the following: 


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1 ‘‘(I) To improve health outcomes by imple2 menting activities such as effective case manage3 ment, care coordination, quality reporting, chronic 

4 disease management or medication and care compli5 ance activities. 

6 ‘‘(II) To prevent hospital readmissions, includ7 ing a comprehensive program for hospital discharge 

8 that includes patient education and counseling, dis9 charge planning, and post-discharge follow-up by an 

10 appropriate health care professional. 

11 ‘‘(III) To improve patient safety and reduce 

12 medical errors through the use of best clinical prac13 tices, evidence-based medicine, and health informa14 tion technology. 

15 ‘‘(IV) To implement a significant investment 

16 (as defined by the Secretary and based on a 2-year 

17 average of expenditures) in technology improvements 

18 such as through electronic medical records, telemedi19 cine, and smart phone or tablet technology. 

20 ‘‘(V) To implement wellness and health pro21 motion activities, including programs designed to ad22 dress the social determinants of health (as defined 

23 in clause (iii)(I)) or to promote patient engagement 

24 (as defined in clause (iii)(II)). 


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1 ‘‘(ii) For purposes of subparagraph (A), an expendi2 ture only shall be considered to be an expenditure for a 

3 quality improvement activity if the expenditure satisfies 

4 1 or more of the following requirements: 

5 ‘‘(I) The expenditure is designed to improve 

6 healthcare quality. 

7 ‘‘(II) The expenditure is designed to increase 

8 the likelihood of desired health outcomes in ways 

9 that can be objectively measured, and that can 

10 produce verifiable results and achievements. 

11 ‘‘(III) The expenditure is directed toward indi12 vidual enrollees, incurred for specific segments of en13 rollees, or provides health improvements to a popu14 lation beyond the population enrolled in coverage 

15 with the entity so long as no additional costs are in16 curred due to the non-enrollees. 

17 ‘‘(IV) The expenditure is grounded in evidence 

18 based medicine (including promising practices which, 

19 with documented justification, go beyond the exist20 ing evidence base), or widely accepted best clinical 

21 practice, or criteria issued by recognized professional 

22 medical associations, accreditation bodies, govern23 ment agencies, or other nationally recognized health 

24 care quality or health improvement organizations. 


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1 ‘‘(iii)(I) For purposes of clause (i)(IV), the term ‘so2 cial determinants of health’ means conditions in the envi3 ronments in which people are born, live, learn, work, play, 

4 worship, and age; that affect a wide range of health, func5 tioning, and quality-of-life outcomes, risks, patterns of so6 cial engagement and sense of security and well-being, and 

7 have a significant influence on population health out8 comes. These conditions include, but are not limited to, 

9 safe and affordable housing, access to education, public 

10 safety, availability of healthy foods, local emergency and 

11 local health services, and environments free of life-threat12 ening toxins. 

13 ‘‘(II) For purposes of clause (i)(IV), the term ‘patient 

14 engagement’ means actions individuals must take to ob15 tain the greatest benefit for the health care services avail16 able to them, and through which process an individual 

17 harmonizes robust information and professional advice 

18 with the individual’s own needs, preferences and abilities 

19 in order to prevent, manage and cure disease. 

20 ‘‘(D) The Secretary may waive the application of a 

21 requirement of this paragraph or of paragraph (2)(A)(xiv) 

22 to a Medicaid managed care organization for not more 

23 than 2 years, based on the following: 

24 ‘‘(i) The extent to which the organization is 

25 likely to cease offering coverage without the waiver. 


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1 ‘‘(ii) The number of individuals in the plan like2 ly to be affected by loss of coverage. 

3 ‘‘(iii) The impact of the loss of coverage on the 

4 ability of the beneficiaries to receive coverage under 

5 another plan and to have continuity of care. 

6 ‘‘(iv) The impact on the rates calculated for 

7 other Medicaid managed care organizations that 

8 would provide coverage for the beneficiaries that 

9 would be affected by the termination of coverage. 

10 ‘‘(v) Upon the request of a Medicaid managed 

11 care organization, to permit implementation of 

12 major plan changes (but only for 1 contract year). 

13 ‘‘(vi) Any other relevant information submitted 

14 by the Medicaid managed care organization or the 

15 State.’’. 

16 (b) APPLICATION TO MANAGED CARE PLANS UNDER

17 CHIP.—Section 2103(f)(3) of such Act (42 U.S.C. 

18 1397cc(f)(3)) is amended— 

19 (1) by inserting ‘‘subsection (m)(2)(A)(xiv) of 

20 section 1903 (relating to minimum medical loss ratio 

21 requirements, except that the minimum medical loss 

22 ratio applicable to managed care organizations under 

23 this title shall be .80) and’’ after ‘‘application of’’; 

24 and 


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1 (2) by inserting ‘‘other’’ before ‘‘requirements 

2 for’’. 

3 (c) REGULATIONS.—Not later than October 1, 2015, 

4 the Secretary of Health and Human Services shall promul5 gate regulations implementing the amendments made by 

6 this section. The regulations shall require that initial test 

7 reporting of medical loss ratios by Medicaid managed care 

8 organizations be made not later than October 1, 2016. 

Æ 


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