The Centers for Medicare and Medicaid Services has issued a proposed rule to implement medical loss ratio requirements for the Medicare Advantage Program (Part C) and the Medicare Prescription Drug Benefit Program (Part D).

The rule is available here and scheduled for publication on Feb. 22. The Affordable Care Act mandates insurers comply with a medical loss ratio, or MLR, under which a certain percentage of revenue is used for patient care--including quality initiatives--rather than administrative and marketing expenses, profit, and other such items.

An interim final rule effective in January 2011 set the MLR at 85 percent for the private insurance large group market and at 80 percent for the private small group and individual markets. The new proposed rule sets the MLR at 85 percent for the Medicare Advantage and drug benefit plans. Insurers must meet the MLR or face financial penalties and eventually contract terminations if they chronically miss the threshold.

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