CMS rejects Michigan bid for adjustment on MLR standard

Michigan will not receive an adjustment to the healthcare reform law's medical-loss-ratio standard that requires health plans to spend 80 cents of every premium dollar on medical care, a CMS official announced Monday.

Earlier this year, the Michigan Office of Financial and Insurance Regulation requested a change to the MLR standard so that issuers would be required to meet a threshold of 65% in 2011, 70% in 2012 and 75% in 2013.

“What we found: some insurance companies, based on their estimates to the Michigan insurance department, might be paying rebates in 2011, but they would still be profitable after paying rebates,” Gary Cohen, acting director of oversight for CMS' Center for Consumer Information and Insurance Oversight, said during a call with reporters. “Others said they were adjusting business practices so they would be able to meet the 80-20 rule without having to pay rebates,” he continued. “So we reached conclusion that no adjustment was needed.”

A letter from CCIIO to Kevin Clinton, commissioner at the state's financial and insurance regulation office, noted that, based on information submitted from the state, maintaining the 80% standard could result in about $89.1 million in rebates to consumers over three years, as opposed to about $38 million over three years that would have resulted from adjusting the MLR ratio.