Healthcare Business News

Obama administration plans to relax medical-loss ratios requirement

By Paul Demko
Posted: March 14, 2014 - 2:30 pm ET

Federal officials intend to relax rules governing medical-loss ratios for health plans sold on the state and federal exchanges owing to problems with the initial open enrollment period.

That plan, which could mean less money flowing back to consumers, was disclosed in a rule published Tuesday (PDF), although no specific details were included.

“We intend to propose standardized methodologies to take into account the special circumstances of issuers associated with the initial open enrollment and other changes to the market in 2014, including incurred costs due to technical problems during the launch of the state and federal exchanges,” the rule states.

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Under the Patient Protection and Affordable Care Act, health plans are required to spend at least 80% of premiums on medical costs. If they fail to do so, customers are entitled to a refund of the non-allowable costs.

The rule change is likely in reaction to expectations that insurers face increased administrative costs for 2014 because of the technological problems that plagued the federal exchange in the first two months of operations and that continue to cause issues for some state-based exchanges. In addition, the Obama administration's decision to allow plans that don't meet the coverage requirements of the ACA to be renewed as late as Oct. 1, 2016, is also likely to increase costs for health plans.

It's merely the latest adjustment that the Obama administration has made as it seeks to implement the law. Jack Meyer, a managing principal with Health Management Associates, a Washington-based consulting and research firm, says it seems logical to adjust the medical-loss ratio rules given the problems. “This one seems reasonable to me, assuming it's a temporary adjustment,” Meyer said.

The plan to change the requirement was first flagged by Inside Health Policy.

Follow Paul Demko on Twitter: @MHpdemko

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