BAS Blog


 

Medical Loss Ratio Rule Issued by HHS

An Interim Final Rule issued by the Department of Health and Human Services provides that fees paid to brokers and agents will not be considered part of "medical care" for purposes of limits imposed on insurers under health care reform. The Medical Loss Ratio (MLR) provisions of the Affordable Care Act require insurers to spend at least a specified percentage of employees’ premium dollars on clinical care, rather than on administrative expenses such as executive salaries, overhead, marketing and profit. If an insurer does not spend enough on patient care to satisfy the MLR provisions, the insurer must make financial adjustments and provide rebates to customers. Health care reform sets the minimum MLR level at 85 percent for the large group market and 80 percent for the small group market. This means that administrative and other non-clinical costs can be no more than 15 or 20 percent of the insurer’s revenue. If an insurer fails to meet these standards, the insurer will be required to provide a rebate to customers beginning this year (2012).

Fees paid to brokers and agents will not be considered medical care or health care quality improvement for purposes of calculating MLR. Therefore, insurers will have to include broker payments as part of the 20% (or 15%) administrative expense (non-medical care/quality improvement) allocation. Rebates will be paid to employer policy holders in the form of cash or reduced premiums, but notice of a rebate must be given to both the employer and participating employees. The government has clarified that rebates will not be subject to tax. Employers will be liable for proper handling of the rebates, which may require an allocation for the benefit of employees. The first rebate payments are expected in August 2012.

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Importance of Annual COBRA Notices Review

Employers should review their COBRA notices to make sure they are compliant with current law. Last fall, the government issued modifications to the Trade Adjustment Act which resulted in modifications to the advance payment available to certain individuals who become eligible for trade adjustment assistance and for certain retired employees who are receiving pension payments from the Pension Benefit Guaranty Corporation. The COBRA qualifying event notice may include a reference to the TAA, and employers may wish to confirm that all references are current. Similarly, a reference to the premium reduction available under the American Recovery and Reinvestment Act of 2009 may be removed from the COBRA notice for most qualifying events.

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Question of the Week

The following FAQs were presented in BAS' weekly email newsletter. If you'd like to receive the free weekly email newsletter, complete send an email to Subscriptions@BASusa.com. The FAQs below are listed in descending chronological order

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Privacy and Security Compliance Deserves Attention

Google's announcement this week that beginning March 1, it will merge user data collected across multiple Google services, in conjunction with recent customer security incidents by the likes of big-companies Zappos and Sony, has once again brought privacy and security issues to the forefront.

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BAS Launches New HRA Administration Services

Benefit Allocation Systems, Inc. will begin administering Health Reimbursement Accounts (“HRAs”) to compliment its online enrollment and Flexible Spending Account (“FSA”) administration services effective April 1, 2012.

This important offering will provide clients with three valuable service level options: (1) HRA Standalone administration, (2) FSA Standalone administration and (3) Combined HRA and FSA administration.

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Insurers Perform Due Diligence Anticipating Medical Loss Ratio Rebates

The Affordable Care Act requires insurers to implement medical loss ratio provisions for their book of business. A minimum medical loss ratio, or MLR, is a requirement that insurers spend at least a specified percentage of employees' premium dollars on clinical care, rather than on administrative expenses such as executive salaries, overhead, marketing and profit. If an insurer does not spend enough on patient care to satisfy the MLR provisions, the insurer must make financial adjustments and provide rebates to customers. Health care reform sets the minimum MLR level at 85 percent for the large group market and 80 percent for the small group market. This means that administrative and other non-clinical costs can be no more than 15 or 20 percent of the insurer's revenue. If an insurer fails to meet these standards, the insurer will be required to provide a rebate to customers beginning this year (2012).

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IRS Issues Revised Form W-2 Health Coverage Reporting Requirements

The IRS issued revised guidance on reporting the cost of employer-sponsored health coverage. Notice 2012-9 clarifies prior guidance and provides details for employers on complying with the new health coverage reporting requirement.

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Obama Administration Submits Legal Brief Supporting Individual Mandate

As the next move in the continuing saga over the constitutionality of health care reform, the Obama administration submitted a 130-page legal brief to the Supreme Court Friday afternoon defending the constitutionality of the requirement that Americans purchase health insurance beginning in 2014 or face a penalty. This "individual mandate" is the most hotly contested aspect of the Affordable Care Act. Arguments in Department of Health and Human Services v. Florida, the case challenging the constitutionality of health care reform, will be heard by the Supreme Court March 26 through March 28, 2012. Arguments focusing on the individual mandate are scheduled for hearing March 27, 2012.

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New Hires Start off the New Year

BAS has added four new employees to its team to start off the New Year. BAS's new hires will provide support in large account management, programming, call center and administration.

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2012 Healthcare Exchange Forecast

The law firm McKenna Long & Aldridge LLP has compiled a “Look Ahead to 2012” for exchange watchers that gives a sense of the current landscape, the big decisions to come and what steps, if any, each state may take toward establishing an exchange this year.

Here is an excerpt:

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Wisconsin Halts Health Care Exchange Preparation

Almost as fast as Wisconsin started its preparations for state insurance exchanges under the Affordable Care Act, Republican Governor Walker issued an emergency rule stopping work on the development of a Wisconsin exchange.

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