Medical Loss Ratio (MLR) Interim Final Regulations Announced

CIGNA Perspective on the Ruling At CIGNA, we continue to support the objectives of health care reform. We expected these interim final regulations. CIGNA is less impacted by MLR than our competitors because we are more diversified and a smaller percentage of our business is insured. We fully embrace the goals of improving the quality of health care and providing transparency in an effort to reduce health care costs. We look forward to working collaboratively with national leaders to improve the quality and cost of health care. CIGNA will continue advocating on behalf of our clients, benefit advisor partners and customers. We also encourage your voices to be heard. Please contact your CIGNA sales representative if we can assist.

On November 22, 2010, the Departments of Treasury, Labor, and Health and Human Services jointly announced Interim Final Regulations for the Patient Protection and Affordable Care Act’s (PPACA) Medical Loss Ratio (MLR) provision. 
The provision states that beginning in 2011, insurers and HMOs must annually calculate their MLR and provide rebates to policyholders if their MLR (percent of premium revenue spent on claims/medical care) is less than 85 percent for large groups and 80 percent for small groups or individuals.
MLR applies to insured plans only, regardless of grandfathered status.
Largely, the regulations are consistent with recent recommendations from the National Association of Insurance Commissioners (NAIC).
General highlights of the regulations include:

• MLR rebates will be sent to policyholders, which include employers or employee organizations as well as individual plan policyholders.
• Insurers may distribute rebates to employers; in turn, employers would need to issue rebates to employees, based on employee contributions.
• Policyholders are potentially eligible for a rebate determined on a “block” basis. The “block” is defined by:
• Organization size (individual; small or large employer group)
• Legal entity issuing coverage
• State of issuance
• Limited medical and expatriate international plans handled separately
• Small group is defined as 2-50 employees – unless a state defines it differently – until at least 2016.
• For the 2011 reporting year, issuers of limited medical (“mini-med”) and expatriate international plans are subject to separate calculation rules.
• The plan’s numerator of the total claims incurred and expenditures for activities that improve health care quality would be multiplied by two.
• Carriers will be required to complete additional quarterly reporting through 2011.
• After reviewing this additional reporting, these adjustments will be revisited by the Secretary for 2012 and beyond.
• Broker commissions will be included in the MLR calculation.
• Non-U.S. insurance companies do not file MLR.

Next Steps
These are Interim Final Regulations from the Department of Health and Human Services (HHS).  There will be a 60-day comment period.  Final regulations may differ. As additional clarification is made available whether through rule-making or otherwise, we’ll share updates.

Health Insurance Costs Up 6 Percent, Survey Finds

By Maggie Fox, Health and Science Editor
WASHINGTON, Nov 11 (Reuters) – Healthcare costs for people insured through an employer rose 6.3 percent for the year ended June 30, according to a new Thomson Reuters (TRI.N) index released on Thursday.
It found spending for hospital care rose especially fast — 8.2 percent, compared to a 5.5 percent rise for physician services and a 3.4 percent increase in drug costs.
“Overall, we estimate the per capita healthcare spending for those covered by private insurance is increasing at a rate of 6.3 percent annually in the 2nd quarter of 2010,” reads the report, available here
“It is growing well above the rate of inflation,” said Gary Pickens, chief research officer at the Thomson Reuters Center for Healthcare Analytics.
Thomson Reuters, parent company of Reuters, used data gathered from hospitals, insurers and other clients to gather the information, which it said represents more than 12 million employees and their dependents.
Pickens and colleagues created an index. “These are based on spending estimates that we don’t expose in this report,” Pickens said in a telephone interview.
The index is calibrated to 100 in 2002. Based on this, total health spending by people covered by employer insurance was 53 percent higher at the end of June 2009 than in 2002, and 62 percent higher in June 2010, an additional increase of 6.3 percent.
“Those changes compound and build up quickly,” Pickens said. “That’s why all the talk around the healthcare reform debate had to do with bending the cost curve. It’s very real.”
WORKPLACE BENEFIT
About 60 percent of Americans under 65 get health insurance through an employer — about 157 million adults. Health insurers include WellPoint (WLP.N), Aetna Inc (AET.N), Cigna Corp (CI.N), Humana Inc (HUM.N), UnitedHealth Group Inc (UNH.N), Health Net Inc (HNT.N), Amerigroup Corp (AGP.N) and the Blue Cross Blue Shield network.
Roughly 45 million people 65 and older have coverage through the nation’s Medicare program for the elderly and disabled.
Another 47 million lack insurance, and on Tuesday the U.S. Centers for Disease Control and Prevention estimated that 59 million Americans had no insurance for at least some of the beginning of 2010. [ID:nN09122635]
Healthcare reform was the signature policy for President Barack Obama, but polls show many Americans are unhappy with the bill signed into law in March. Republicans who will take control of the House of Representatives in January have promised to do whatever they can to block its implementation
Pickens said his team is working to break down details but the data covers three main areas — spending in hospitals, on doctor services and on prescription drugs.
Drug spending was the surprise area. “Some categories (of prescription drugs) are growing very rapidly,” Pickens said — for instance, biologics such as targeted drugs for cancer.
He believes the wide availability of cheap generics, especially those offered free or for $4 per refill by retail pharmacies, may be keeping prices from growing too fast.
The report notes that per capita spending inflation for prescription drugs increased dramatically until 2002 but the rate of increase has fallen since 2004.
Consultants PricewaterhouseCoopers LLP and Hewitt Associates both predict U.S. employers will pay nearly 9 percent more for health care costs for their workers in 2011, with Hewitt projecting that the average healthcare cost per employee will rise to $9,821 in 2011, up from $9,028 in 2010.
Hewitt says employees will pay $2,209, or 22.5 percent of the total premium, up 12.4 percent from 2010.

How the 2010 changes in health care reform may impact you

How the 2010 changes may impact you
We are now focused on helping all of our constituents navigate through the changing health care landscape and prepare for the future. We have developed a piece to describe of some of the 2010 changes and their anticipated impact.
We hope this is helpful information pertaining to health care reform and its impact. Our next topic in the series will profile impacted benefits.

New easy to follow timeline of health care reform

Timeline
The new health care reform will expand the availability of health care coverage to millions of Americans. While some of the measures of the new health care reform will be implemented this year, many do not take effect until 2014 and some extend out to 2020. We have created a high-level overview of the timeline to showcase key milestones of the measures. It is important to note that many of these reforms and their effective dates are subject to the rules and regulations process both at the state and federal levels — which could alter the intended timing of implementation.