Medical Loss Ratio
HHS is proposing to make adjustments to the medical loss ratio (MLR) reporting formula for certain “qualified issuers” who have significant risk adjustment transfers.
HHS proposed a “qualifying issuer” to be defined as “an issuer whose ratio of net payments related to the risk adjustment program under section 1343 of the ACA to earned premiums prior to accounting for the net payments or receipts related to the risk adjustment, risk corridors, and reinsurance programs (as described in §158.130(b)(5)) in a relevant State and market is greater than or equal to 50 percent.”[14] This was finalized with modification, to reflect the definition of qualifying issuer “is based on an issuer’s 3-year aggregate ratio of net payments related to the risk adjustment program under section 1343 of the ACA to earned premiums as defined in §158.130, but prior to and excluding the adjustments in §158.130(b)(5) that account for the net payments or receipts related to the risk adjustment, risk corridors, and reinsurance programs, in a relevant State and market.” HHS estimated few issuers would be considered qualifying issuers, and 2023 data shows fewer than half a dozen additional issuers have aggregate ratios of risk adjustment receipts to premium between 20 and 50 percent.
The MLR formula adjusts incurred claims by risk adjustment transfers, however, the proposal would allow qualifying issuers to NOT adjust incurred claims by the risk adjustment transfers.[15] Instead, the earned premium in the denominator. HHS suggested the current MLR methodology may not be appropriate for certain issuers with unusual business models causing significant risk adjustment transfers. The current and proposed formulas were also published in the E. Part 158—Issuer Use of Premium Revenue: Reporting and Rebate Requirements section, subsection 2. Reimbursement for Clinical Services Provided to Enrollees (§§158.140, 158.240). This was also finalized with a modification to allow qualifying issuers to adjust the MLR at their option, as opposed to qualifying issuers being required to use the adjusted MLR.
Plan Management, Rate Filing and Rate Review Process
Reduce Solvency Risk
HHS is soliciting comment on methodologies that can reduce the risk of issuer insolvencies,[16] of which there have been several in recent years including Friday Health Plans and Bright Health Plans. Suggestions included coordinating with State DOIs and the National Association of Insurance Commissioners (NAIC) to identify issuers at risk, ie by looking at significant enrollment growth for new carriers, RBC ratios[17] or quick ratios.[18] HHS will take comments under consideration in future rulemaking.
Silver Loading
Silver loading refers to a premium load applied to silver metal plans to reflect that the federal government is not longer funding the cost-sharing reduction (CSR) plans.
HHS codified that CSR loading practices that are “permitted by State regulators are permissible under Federal law to the extent that they are reasonable and actuarially justified.”[19] This does not appear to be a change to current practices. HHS finalized the language without using the shorthand “CSR loading”, “actuarial loading” or “silver loading”, and removed references to “reasonable.” Specifically, HHS finalized amendments to §156.80(d)(2)(i) to “specify that the actuarially justified plan-specific factors by which an issuer may vary premium rates for a particular plan from its market-wide index rate include the actuarial value and cost-sharing design of the plan, including, if permitted by the applicable State authority, accounting for CSR amounts provided to eligible enrollees under §156.410, provided the issuer does not otherwise receive reimbursement for such amounts.”
[14] Part 158—Issuer Use of Premium Revenue: Reporting and Rebate Requirements – 1. Definitions (§158.103) and 2. Reimbursement for Clinical Services Provided to Enrollees (§§158.140, 158.240)
[15] Part 158—Issuer Use of Premium Revenue: Reporting and Rebate Requirements – 2. Reimbursement for Clinical Services Provided to Enrollees (§§158.140, 158.240)
[16] D. Part 156—Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges – 1. Solicitation of Comments—Reducing the Risk That Issuer Insolvencies Pose to the Integrity of the Federally-Facilitated Exchanges
[17] The risk-based capital ratio is defined as the ratio of an issuer’s total adjusted capital to its authorized control level risk-based capital.
[18] The quick ratio is defined as the ratio between quickly available or liquid assets and current liabilities.
[19] D. Part 156—Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges – 3. Silver Loading (§156.80)