The Centers for Medicare and Medicaid Services has sent a final rule establishing health insurers' "medical loss ratios" to the Office of Management and Budget for review. OMB review is one of the last steps before publication of a rule in the Federal Register.
Implementation of medical loss ratio requirements is mandated under the Affordable Care Act. To reduce excessive costs, the reform law mandates that insurers spend a minimum amount of revenue from premiums on payment for clinical care. This is the "medical loss ratio" and the minimum level is set at 85 percent for the large group market and 80 percent for the small group market.
Insurers have been negotiating with regulators about what activities will be counted as administrative and what activities could be considered as clinical functions beyond treatment, such as preventive and disease management programs. This way, insurers hope to reach the medical loss ratio by having some costs that are now considered administrative counted on the clinical side.
Some organizations, particularly the Medical Group Management Association, hope the medical loss ratio compels insurers to accelerate adoption of HIPAA electronic financial and administrative transactions to become more efficient on the administrative side.
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