Healthcare Reform Update and ‘Mini-Meds’ (2011)
Many large employers with hourly employees are offering a Limited Health Plan (or “mini-med”) instead of a major medical health plan. These plans are an affordable alternative and offer easy access with voluntary participation and often have no requirement for an owner to contribute to the monthly premiums. Often, there are three levels of coverage from which employees can choose. The levels have varying amounts of coverage for office visits, outpatient care, hospitalization, and prescription drugs, all with annual limits. It also helps patients to have an insurance card, negotiated provider discounts and a claims arrangement where the medical provider does the paperwork and bills claims through the insurance company.
Healthcare Reform under the new legislation of 2010 threatens to make Limited Health Plans obsolete. There are several aspects of the legislation that are inconsistent with Limited Health Plans. First of all, the legislation says that medical coverage must be unlimited, or without annual maximums. Secondly, the legislation intends to define a group of ‘Essential Benefits’ which are likely to exceed the benefits offered under Limited Health Plans. Thirdly, the legislation provides for mandatory employer contributions to the premiums, starting in 2014, under threat of tax penalties for companies with over 50 employees. Last, but not least, the legislation requires that insurance plans maintain a loss ratio of 85% or greater, a ratio much higher than is currently in place. The medical loss ratio is the percentage of premiums going to paying claims. In other words, the 15% would include administrative costs, marketing, and profits.
From here, the news gets much more positive. Earlier this year, Cigna/Starbridge, and several other plans, received 'grandfathered' status where they were able to continue under the same benefit schedules as before. On 10/1/10, Cigna/Starbridge announced that it had received a waiver to allow the mini-med to avoid having to increase annual maximums or limits. Whether a Plan like this can exist after 2014, remains to be seen however.
In September, McDonald’s Corp. warned the federal government that it could drop its limited medical plan for nearly 30,000 hourly restaurant workers unless the agency waived the medical-loss ratio requirement. McDonald's wrote that if it didn't get an exemption, "it would be economically prohibitive for our carrier to continue offering" the mini-med plan. In its latest bulletin, HHS Office of Oversight Director Steven Larsen confirmed that some entities are asking for special consideration on the medical-loss ratio requirement and saying a failure to receive that consideration "could result in a loss of coverage." These entities told the agency that, although their administrative costs are similar to other plans, their premium base is low relative to other plans, which makes meeting the requirement more difficult, according to the bulletin. Some groups, including the National Retail Federation, are hopeful that the special methodology will serve a similar purpose. They are waiting to see the exact language of the rules, expected to come later this year.
The medical loss ratio (MLR) requirement of 85% was unrealistic from the start. Few, if any, major insurers can meet this requirement currently. It seems there is a huge debate now over whether some admin costs can be added to actual health care expenses. For example, can the cost of processing claims be included in the 85%, or is it in the 15%? What about the cost of utilization review nurses, medical review boards, grievance processes, negotiation of provider discounts, preventive care newsletters to patients, claims notification letters? The insurance companies had most of these expenses classified as 'admin' costs in the past, but now they are scrambling to try and include them in their medical loss ratio, along with the actual payments for healthcare services. It's a problem for all health insurance, and mini-meds especially. After the elections last month, the debate on this will heat up. I expect that portions of the healthcare reform legislation will be adjusted in the next year or so. The adjustments should be more favorable to the business community. It's interesting that the vocal opposition by McDonald's and some political groups could help expand the use of mini-meds as a partial solution to the healthcare reform dilemma.
On November 22nd, 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 is less than 85% for large groups and 80% for small groups or individuals. MLR applies to insured plans only, regardless of grandfathered status. 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”) are subject to separate calculation rules. After reviewing this additional reporting, these adjustments will be revisited by the Secretary for 2012 and beyond.
Key federal agencies (Labor, Treasury, HHS) issued a revision to a previously issued Interim Final Regulation on grandfathering that set forth the rules allowing consumers to "keep the coverage they have" as of March 23, 2010, the date the President signed PPACA. The revision announced November 22nd provides additional flexibility for fully insured grandfathered plans by allowing them to change insurers without jeopardizing their grandfathered status the same way a self-insured plan can change third-party administrators (without losing grandfathered status). These latest revisions make it a certainty that more clarifications, adjustments and corrections will be made in 2011. Mini-meds could actually turn out to be a viable compromise solution to the healthcare reform puzzle. With Mini-meds, employers can offer a medical plan at a low cost. The number of uninsured working Americans could be reduced dramatically.
Healthcare Reform under the new legislation of 2010 threatens to make Limited Health Plans obsolete. There are several aspects of the legislation that are inconsistent with Limited Health Plans. First of all, the legislation says that medical coverage must be unlimited, or without annual maximums. Secondly, the legislation intends to define a group of ‘Essential Benefits’ which are likely to exceed the benefits offered under Limited Health Plans. Thirdly, the legislation provides for mandatory employer contributions to the premiums, starting in 2014, under threat of tax penalties for companies with over 50 employees. Last, but not least, the legislation requires that insurance plans maintain a loss ratio of 85% or greater, a ratio much higher than is currently in place. The medical loss ratio is the percentage of premiums going to paying claims. In other words, the 15% would include administrative costs, marketing, and profits.
From here, the news gets much more positive. Earlier this year, Cigna/Starbridge, and several other plans, received 'grandfathered' status where they were able to continue under the same benefit schedules as before. On 10/1/10, Cigna/Starbridge announced that it had received a waiver to allow the mini-med to avoid having to increase annual maximums or limits. Whether a Plan like this can exist after 2014, remains to be seen however.
In September, McDonald’s Corp. warned the federal government that it could drop its limited medical plan for nearly 30,000 hourly restaurant workers unless the agency waived the medical-loss ratio requirement. McDonald's wrote that if it didn't get an exemption, "it would be economically prohibitive for our carrier to continue offering" the mini-med plan. In its latest bulletin, HHS Office of Oversight Director Steven Larsen confirmed that some entities are asking for special consideration on the medical-loss ratio requirement and saying a failure to receive that consideration "could result in a loss of coverage." These entities told the agency that, although their administrative costs are similar to other plans, their premium base is low relative to other plans, which makes meeting the requirement more difficult, according to the bulletin. Some groups, including the National Retail Federation, are hopeful that the special methodology will serve a similar purpose. They are waiting to see the exact language of the rules, expected to come later this year.
The medical loss ratio (MLR) requirement of 85% was unrealistic from the start. Few, if any, major insurers can meet this requirement currently. It seems there is a huge debate now over whether some admin costs can be added to actual health care expenses. For example, can the cost of processing claims be included in the 85%, or is it in the 15%? What about the cost of utilization review nurses, medical review boards, grievance processes, negotiation of provider discounts, preventive care newsletters to patients, claims notification letters? The insurance companies had most of these expenses classified as 'admin' costs in the past, but now they are scrambling to try and include them in their medical loss ratio, along with the actual payments for healthcare services. It's a problem for all health insurance, and mini-meds especially. After the elections last month, the debate on this will heat up. I expect that portions of the healthcare reform legislation will be adjusted in the next year or so. The adjustments should be more favorable to the business community. It's interesting that the vocal opposition by McDonald's and some political groups could help expand the use of mini-meds as a partial solution to the healthcare reform dilemma.
On November 22nd, 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 is less than 85% for large groups and 80% for small groups or individuals. MLR applies to insured plans only, regardless of grandfathered status. 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”) are subject to separate calculation rules. After reviewing this additional reporting, these adjustments will be revisited by the Secretary for 2012 and beyond.
Key federal agencies (Labor, Treasury, HHS) issued a revision to a previously issued Interim Final Regulation on grandfathering that set forth the rules allowing consumers to "keep the coverage they have" as of March 23, 2010, the date the President signed PPACA. The revision announced November 22nd provides additional flexibility for fully insured grandfathered plans by allowing them to change insurers without jeopardizing their grandfathered status the same way a self-insured plan can change third-party administrators (without losing grandfathered status). These latest revisions make it a certainty that more clarifications, adjustments and corrections will be made in 2011. Mini-meds could actually turn out to be a viable compromise solution to the healthcare reform puzzle. With Mini-meds, employers can offer a medical plan at a low cost. The number of uninsured working Americans could be reduced dramatically.
