Source: https://www.federalregister.gov/articles/2012/05/16/2012-11753/medical-loss-ratio-requirements-under-the-patient-protection-and-affordable-care-act
Timestamp: 2016-06-29 09:07:00
Document Index: 408640404

Matched Legal Cases: ['§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158', '§ 158']

Dates: Effective date. This rule is effective on June 15, 2012.
-28797 (8 pages)
Document Number: 2012-11753
Shorter URL: https://federalregister.gov/a/2012-11753 Related Topics
On December 7, 2011, the Centers for Medicare Medicaid Services (CMS) published an interim final rule (76 FR 76596) with a 60-day public comment period entitled, “Medical Loss Ratio Rebate Requirements for Non-Federal Governmental Plans,” establishing rules governing the distribution of rebates by health insurance issuers in group markets for non-Federal governmental plans. Also on December 7, 2011, CMS published a final rule (76 FR 76574) with a 30-day public comment period, entitled “Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act,” that addressed the treatment of “mini-med” and expatriate policies under the MLR regulations for years after 2011; modified the way the regulations treat International Statistical Classification of Diseases and Related Health Problems, 10th Revision (ICD-10) conversion costs; changed the rules on deducting community benefit expenditures; and revised the rules governing the distribution of rebates by issuers in group markets.
II. Analysis of and Responses to Public Comments Back to Top
Response: Expanding the notice of MLR information to all issuers would further the goals of improving transparency of health insurance markets, supporting more informed purchase decisions, and promoting competition and efficiency. At the same time, we appreciate the concerns about administrative costs. Further, we recognize that under the Affordable Care Act, issuers' MLR information will be available on the HHS Web site, HealthCare.gov, providing an efficient method of public disclosure.
In paragraph (a)(1) of new § 158.251 of this final rule, we set forth the general requirement that an issuer whose MLR meets or exceeds the applicable MLR standard required by § 158.210 or § 158.211 must provide each policyholder and subscriber of a group health plan, and each subscriber in the individual market, a notice of MLR information. The required language for the notice is specified in paragraph (a)(4). This notice requirement applies only for the 2011 MLR reporting year.
In paragraph (a)(2), we generally align the timing of this new notice with the timing specified in § 158.240(d) for providing any rebates that are due and the accompanying notice of rebates. We specify that 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.
In paragraph (b), we specify certain exceptions to the MLR notice requirement. We are not requiring health insurance issuers that sell plans with total annual benefit limits of $250,000 or less (“mini-med” plans) or expatriate policies, as described in § 158.120(d)(3) and (d)(4), respectively, to provide MLR notices to policyholders and subscribers if they meet or exceed the applicable MLR standard. As discussed in the preamble to the December 7, 2011 final rule with comment period, issuers of mini-med and expatriate policies will use a separate methodology for calculating the MLR numerator for reporting and rebate purposes and are subject to separate notice rules. We note that issuers of mini-med and expatriate plans must continue to provide notice of rebates, if any, to current group health plan policyholders and subscribers, and to subscribers in the individual market, as provided under § 158.250.
In addition, we are not requiring issuers whose experience is non-credible, as defined in § 158.230(c)(3) and determined in accordance with § 158.231, to provide MLR notices to policyholders and subscribers. An issuer that has fewer than 1,000 covered life-years does not have sufficiently credible data to determine whether the MLR standard has been met and thus, under § 158.230(d), is presumed to meet or exceed the applicable minimum MLR standard. Because non-credible issuers do not have an MLR to report, the MLR notice requirement in this final rule does not apply.
CMS developed this rule to accomplish its intended benefits in the most economically efficient manner possible. We have examined the effects of this rule as required by Executive Order 13563 (76 FR 3821, January 21, 2011), Executive Order 12866 (58 FR 51735, September 1993, Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) (September 19, 1980, 96), section 1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), Executive Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 804(2)). In accordance with the Office of Management and Budget (OMB) Circular A-4, CMS has quantified the benefits, costs, and transfers where possible and provided a qualitative discussion of some of the benefits, costs, and transfers that may stem from this final rule.
On December 1, 2010, we published an interim final rule (75 FR 74864) with a 60-day public comment period. In that rule, we indicated that the most complete source of data on the number of licensed entities offering fully insured, private comprehensive major medical coverage in the individual and group markets is the National Association of Insurance Commissioners' (NAIC) Annual Financial Statements and Policy Experience Exhibits database. These data contain multiple years of information on issuers' revenues, expenses, and enrollment, collected on various NAIC financial exhibits (commonly referred to as “Blanks”) including Supplemental Health Care Exhibits (SHCEs) that issuers submit to State insurance regulators through the NAIC. The NAIC has four different Blanks for different types of issuers: Health; Life; Property Casualty; and Fraternal issuers.
In the December 1, 2010 interim final rule, our analysis relied on 2009 data from the NAIC database. A total of 618 issuers offering comprehensive major medical coverage filed annual financial statements in 2009, with the Health and Life Blank filers accounting for approximately 99 percent of all comprehensive major medical premiums earned. For this reason, we restricted our analysis to Health and Life Blank companies. Comprehensive major medical coverage
—including coverage offered in the individual and group markets subject to this final rule—accounted for approximately 47.8 percent of all Accident and Health (A) premiums in 2009. Although the NAIC data represent the best available data source with which to estimate impacts of the MLR rule, the data contain certain limitations; we developed imputation methods to account for these limitations, and we made several additional data edits that led us to exclude 176 companies from the analysis. We used the remaining 442 companies to estimate the regulatory impacts that were discussed in the December 1, 2010 interim final rule, as well as the regulatory impacts that are discussed below. We refer readers to the regulatory impact analysis of the December 1, 2010 interim final rule (75 FR 74892) for additional methodological information.
As discussed above in the preamble, health insurance issuers that sell plans with total annual benefit limits of $250,000 or less (“mini-med” plans) or expatriate policies, as described in § 158.120(d)(3) and (d)(4), respectively, are not required to provide notice of MLR information to policyholders and subscribers. The 2009 NAIC data does not allow us to identify these types of policies separately. Under the December 1, 2010 interim final rule, for the 2011 MLR reporting year, issuers of mini-med and expatriate policies were required to report MLR data on a quarterly schedule under § 158.110(b). Based on the quarterly reports, it was estimated that, in 2011, there were 25 issuers of mini-med policies with approximately 1 million enrollees and 8 issuers of expatriate policies with approximately 300,000 enrollees.
To the extent that enrollees in mini-med and expatriate plans were included in the 2009 NAIC data, this analysis overestimates the number of entities affected by these requirements, the number of notices to be sent by issuers of such policies, and the administrative costs of providing notices.
In addition, issuers whose experience is non-credible, as defined in § 158.230(c)(3) and determined in accordance with § 158.231, are not required to provide notice of MLR information to policyholders and subscribers. As discussed in the December 1, 2010 interim final rule, based on 2009 NAIC data, it was estimated that approximately 68 percent of licensed entities (State/company combinations) had less than 1,000 enrollees in at least one State in 2011 and accounted for approximately 1 percent of enrollees. The number of issuers with less than 1,000 enrollees in all market/State combinations is estimated to be 45 in 2011.
In addition, issuers are required to provide MLR notices to group policyholders. In the regulatory impact analysis for the Interim Final Rule for Group Health Plans and Health Insurance Coverage Relating to Status as a Grandfathered Health Plan Under the Patient Protection and Affordable Care Act (75 FR 34538) published on June 17, 2010, it was estimated that there are approximately 3 million large and small group plans, which include self-insured plans (self-insured experience is not subject to the MLR requirements). According to Medical Expenditure Panel Survey data, in 2010, 35.8 percent of all private sector employers that offered health insurance self-insured at least one plan.
In the December 1, 2010 MLR interim final rule, it was estimated that between 1 percent and 3 percent of enrollees in fully insured group health plans would receive rebates during the 2011 MLR reporting year. In the absence of data on the number of group health plans in the NAIC database used for this analysis, we use the percentages of enrollees not receiving rebates and employers offering self-insured plans to estimate the number of fully insured group health plans whose enrollees would not receive rebates for the 2011 MLR reporting year. Therefore, it is estimated that approximately 1.9 million fully insured group policyholders would receive MLR notices, pursuant to this final rule, for the 2011 MLR reporting year.
CMS specifies in this rule standard language to be used for the notices, which will minimize the burden for issuers. Issuers have the option of providing the notices with other plan documents or, if the requirements for electronic disclosure under section 2715 of the PHS Act are satisfied, by using electronic methods. In the Summary of Benefits and Coverage and Uniform Glossary Final Rule (77 FR 8668) published on February 14, 2012, we estimated that electronic distribution would account for 38 percent of all disclosures in the group market.
In addition, according to a report by the Department of Commerce, 71 percent of homes in the U.S. had home Internet access in 2010.
We therefore estimate that 38 percent of notices to subscribers in the group market and 71 percent of notices to subscribers in the individual market will be sent electronically, and the remaining notices will be sent by mail. Further, we assume that all notices to group policyholders or employers will be sent electronically. We assume that issuers will use clerical staff to prepare the notices that are distributed with other plan materials by mail and will need approximately 0.25 minutes (or 0.004 hours) to prepare each notice. The cost of supplies is assumed to be $0.03 per notice, and labor costs are assumed to be $30.67 per hour (or $0.13 per notice). Since the notice may be included with other plan documents, we assume there will be no additional mailing costs.
Table 2—Estimated Administrative Cost of MLR Notices in 2012 Back to Top
$3,002,919
$2,946,544
$2,800,587
As discussed in the interim final rule with comment period published on May 5, 2010 (75 FR 24470) relating to the Federal health care reform insurance Web Portal requirements, CMS examined the health insurance industry in depth in the Regulatory Impact Analysis prepared for the proposed rule on establishment of the Medicare Advantage program (69 FR 46866, August 3, 2004). In that analysis, it was determined that there were few, if any, insurance firms underwriting comprehensive health insurance policies (in contrast, for example, to travel insurance policies or dental discount policies) that fell below the size thresholds for “small” business established by the SBA (currently $7 million in annual receipts for health issuers).
For the December 1, 2010 interim final rule (75 FR 74892), we used the data set created from the 2009 NAIC Health and Life Blank annual financial statement data to develop an updated estimate of the number of small entities that offer comprehensive major medical coverage in the individual and small group markets, and are therefore subject to the MLR reporting requirements. For purposes of this analysis, we used total Accident and Health (A) earned premiums as a proxy for annual receipts. These estimates may overstate the actual number of small health insurance issuers that would be affected, since they do not include receipts from these companies' other lines of business.
2.Section 158.251 is added to read as follows: § 158.251 Notice of MLR information.
(a) Notice of MLR information when the MLR standard is met or exceeded.—(1) General requirement. Except as provided in paragraph (b) of this section, for the 2011 MLR reporting year, an issuer whose MLR meets or exceeds the applicable MLR standard required by § 158.210 or § 158.211 must provide each policyholder and subscriber of a group health plan, and each subscriber in the individual market, a notice in accordance with the requirements of this section.
(b) Exceptions. The requirements of paragraph (a) of this section do not apply to an issuer that reports its experience separately under § 158.120(d)(3) or (d)(4), or to an issuer whose experience is non-credible as defined in § 158.230(c)(3) and determined in accordance with § 158.231.