Good afternoon. I am
going to take a break from discussing Human Resources Interviews to talk a
little bit more about an interesting aspect of the Patient Protection
Affordability and Care Act (PPACA), also known in some circles as Obamacare or
the ACA. I was looking over the
government’s healthcare website www.healthcare.gov and picking up some
information. The aspect I want to
discuss is the Medical Loss Ratio.
This is the Medical Loss Ratio calculation: Divide the amount spent on mediacl care
divided by the amount spent on premiums.
This ratio calculation, in effect since 11/22/2010, states that
insurance companies are required to use 80% to 85% of all premium dollars
directly on medical care. This is
intended to provide consumers with more value for their medical dollar, as
premium dollars will no longer be allowed to be allocated to administrative
costs, overhead, marketing, or executive salaries. In the event that an insurance company spends
more than this premium percentage amount on non-medical costs, that money will
be rebated back to the customers after the end of August each year. As of the end of 2011, average rebate per
person that could be expected was $164.
However, most insurers reduced the rate of premium growth rather than be
forced with giving rebates after the fact.
Starting last year, insurance companies had to begin
reporting total premiums, total reimbursement for medical service, spending on
quality improvement programs, and administrative costs to the Health and Human
Services (HHS). These reports are then
publicly posted by HHS. At the moment, I
am researching where you can find that on their site. In the meantime, you can view the link at the
bottom of the page for the National Conference of State Legislatures
(NCSL). The insurers will be able to
deduct the taxes that apply to health insurance coverage from the insurers
revenue when calculating the Medical Loss Ratio. There are accommodations, exceptions, and waivers
that may apply to your individual organization, be sure to check with a lawyer
and/or tax accountant for an expert opinion.
Finally, keep in mind that there is a financial penalty that
may be imposed for insurers failing to meet the Medical Loss Ratio percentage. There will also be penalties that may be
assessed for failure to supply accurate or timely information about plan
coverage to the HHS. The penalty
assessed for each instance of non-compliance will be $100 per day for each
person in the plan.
And remember all of you Human Resources professionals: Be Human... Be a Resource... Be a Resource for Humans.
Relevant Links:
http://www.healthcare.gov/news/factsheets/2010/11/medical-loss-ratio.html
http://www.ehow.com/how_6460957_calculate-medical-loss-ratio.html
http://www.ncsl.org/issues-research/health/health-insurance-medical-loss-ratios.aspx
Disclaimer:
Please note, this information is based on my understanding
and is only to be used for informational and educational purposes. Do not take what I am writing as advice. Seek your own legal counsel and/or see a tax
accountant before making business or personal decisions.
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