The ACA requires a new federal cap on health plan administrative costs that could have a number of unintended consequences for individuals, families and employers. The MLR requirement:
- Puts at risk the coverage that families and employers rely on today because the provision went into effect in 2011 without a uniform transition period to allow health plans to adjust to the new requirement. Most states do not currently have an MLR requirement or have a requirement below the new federal standard. Without time to make the adjustments and changes needed to comply, some health plans may have no choice but to exit markets altogether.
- Turns-back-the-clock on efforts to improve quality and root out fraud and abuse by only allowing recoveries from fraud programs to be counted towards the MLR (while capping expenses to prevent or deter fraud). Moreover, the requirement does not fully recognize the costs of transitioning to the ICD-10 coding system as a quality expense, a move that is aimed at better monitoring and tracking of health care quality.
- Inhibits innovation by capping any expenses that are not on a pre-approved list of “activities that improve health care quality."
- Increases administrative costs by mandating a variety of new reporting and compliance activities that go far beyond what health plans are required to do today. An AHIP survey, based on preliminary information provided by its members, indicates that the initial costs of implementing the MLR will be substantial for many plans – necessitating the installation of new accounting systems, new forms of data collection, and increased auditing costs to prove compliance with the MLR calculations and rebates. Some large, multi-state plans have identified preliminary compliance costs exceeding $20 million.
- Reduces individuals’ and small businesses’ access to agents and brokers who provide a valuable service to help them find the coverage that best meets their financial and health care needs.
In January 2011, AHIP conducted a survey of health insurance plans on costs of compliance with the new national Medical Loss Ratio (MLR) rule, as enacted in the Affordable Care Act (ACA) and described in an “interim final” rule issued by the Department of Health and Human Services (HHS) on December 1, 2010.
AHIP testimony before the House Energy & Commerce Committee’s Subcommittee on Health’s hearing entitled “The Unintended Consequences and Regulatory Burdens of the New Medical Loss Ratio Requirements.”
AHIP’s letter to HHS raises concerns that the medical loss ratio requirement could disrupt coverage, reduce patients’ access to quality improvement initiatives, and increase administrative costs.
AHIP submitted comments to the National Association of Insurance Commissioners (NAIC) raising concerns that the MLR provision could disrupt the coverage families and employers rely on and turn-back-the-clock on quality improvement initiatives.