Milestone: Determine whether to regulate insurance plans’ compliance with minimum medical loss ratios or defer to the federal government.
States have the option to enforce medical loss ratios, which could be effective in minimizing health plans’ administrative spending and maximizing the benefits of insurance for a state’s insured.
*Milestone details:
*Full name: Determine whether to establish a system to ensure health insurance plans’ compliance with minimum medical loss ratios and associated rebates to consumers, or instead defer to the federal government.
*Relevance to the ACA:
The ACA requires plans to meet minimum medical loss ratio (MLR) requirements, but states have the ability to set higher standards. As with other insurance regulatory requirements, if states do not adopt regulatory standards, the federal government will enforce them.
§1001 – Requires large group plans to spend at least 85% of their premium revenue on reimbursement for clinical services and activities that improve health care quality. Small group or individual market plans must spend at least 80% of premium revenue on these services and activities. If plans do not meet these benchmarks, they are required to give rebates to enrollees. States may require that a higher percentage be spent on these services and activities, but must ensure adequate insurer participation and value for consumers. The Secretary of HHS has the authority to adjust MLR rates in a state if the Secretary determines the rates will destabilize the individual market.
§1321 - Amends state enforcement authority regarding group health plans to include regulation of the individual market, allowing the federal government to preempt state law and enforce consumer protections if states do not.
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District of Columbia
Maine applied for an MLR adjustment and HHS determined that the 80% MLR rate could cause destabilization of the market and that an adjustment of the MLR to 65 percent is warranted. They conclude such an adjustment is appropriate for three years, but the adjustment to 65 percent for the third year is granted on the condition that the Maine Bureau of Insurance provide CCIIO with updated data in 2012 that indicate a continued need for such an adjustment. This letter explains the basis of the HHS decision, which is rooted in the particular circumstances of the Maine insurance market.