Ritter Insurance Marketing, Craig Ritter

Will the Minimum Medical Loss Ratios (MLR) Requirements in the Health Care Reform Bill impact Medigap Insurance

I’d like to weigh in on this issue.  Since President Obama signed the Final Bill today (PPACA 2010), there are still a lot of questions about the impact of the bill.  Many of these questions can’t be answered today, but there may be some concern about the Minimum MLR’s applying to Medicare Supplement Insurance or Medigap.

My opinion is that the MRL requirements in PPACA 2010 will NOT be applied to Medigap insurance.  Here’s why:

1.  Medigap is regulated by the Social Security Act and the Code of Federal Regulations.  If PPACA 2010 changed the Social Security Act with respect to Medigap, I would think that these revisions would have been in the Bill.  If you search PPACA 2010 for the word “Medigap”, it is only mentioned one time with respect to minor changes that are required in 2015 with respect to minimal cost sharing on Plans C and F.

2.  The SSA Sec. 1882 governs Medigap and addresses loss ratios.  Minimum MLR’s are established by the NAIC Model Regulations.  Note, by way of example, that when PPACA changed regulations with regard to the SSA Sec. 1851 and 1853 with regard to Medicare Advantage, the bill clearly indicated how SSA was being amended.

3.  The NAIC Model Regulations on Medigap indicate Minimum MLR’s of 65% for individual and 75% for group.  See section 14 on page 42.  (Individual state’s Departments of Insurance can be more restrictive than NAIC Model, as well.)

4.  The Code of Federal Regulations 42 CFR 403.215 also indicates Minimum MLR’s.  CFR is less stringent than NAIC and has MLR’s of 60% for individual and 75% for group.  See 42CFR403.215.  There are no changes to 42CFR403.215 in the bill that I could find (it was in no way similar to the way Medicare Advantage sections were amended).

4.  PPACA Minimum MLR’s reference “Individual Health Insurance” and “Group Health Insurance” and Medigap is considered “Health Insurance”.  However, there are many other mandates on “Individual Health Insurance” and “Group Health Insurance” which clearly are nonsensical when applied to Medigap.  For example, the mandate to cover children up to age 26, the mandate to offer first dollar preventative services, availability via exchanges, premium subsidies, the mandate to purchase “Health Insurance” and so on.  Therefore, I think a reasonable interpretation of PPACA’s use of “Individual Health Insurance” would exclude Medigap.

5.  Even if PPACA was deemed to include Medigap, the Secretary of HHS can waive minimum MLR requirements.

6.  The NAIC is obliged to define what is included and excluded as losses with respect to loss ratios.  For example, taxes considered as an administrative expense are specificially EXCLUDED in PPACA and specifically INCLUDED in NAIC Medigap Model Legislation.  This would make the minimum MLR more favorable if the PPACA rules applied as interpreted by NAIC.

7.  AARP endorses Group Medigap plans sold by United Healthcare.  Somehow, I don’t think they’d be in favor of an 85% MLR on their group policies!

This is one man’s opinion. . .please add your thoughts below!

Posted by filed under All, CMS, Medicare Supplement, News .

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