Medical Loss Ratio Provision of the Affordable Care Act – Less For ICD-10 and Other Reform Issues

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Medical Loss Ratio Provision of the Affordable Care Act – Less For ICD-10 and Other Reform Issues

More than one in five of all  consumers who are covered under  individual health plans today are insured by companies that spend more than 30 percent of the premium dollar billed on administrative costs.  And, more than one in four are insured by health plans that spend between 25 and 30 percent of every premium dollar on administrative costs.

However on November 22, 2010 the Obama Administration’s regulation implementing  new standards for the “medical loss ratio” provision of the Affordable Care Act will make the insurance industry more transparent and is intended to enable consumers to purchase health insurance that provide more value for every dollar paid for premiums.

Estimates are  that up to 9 million Americans could be eligible for rebates starting in 2012 worth up to $1.4 billion.  The average amount that could be rebated per person could total $164.  MLR rules are in effect now in 2011 and payment of rebates is mandated to begin in 2012.

This creates a double bind for health plans who already must spend more of their IT and operations expenses on compliance with new health care standards including the EDI standard HIPAA 5010 and medical coding standard ICD-10.  If a plan is wasteful and does not provide good value, then the MLR rules will have a favorable effect fo that plan’s members.  On the other hand, ICD-10 is expected to be expensive and span over three years.  We believe that the MLR rules could challenge some health plans to squeeze in new expenses in an already tight fifteen percent of premium dollars received.   ICD10, HIPAA 5010, and other regulations continue to challenge the health care industry.  Meanwhile, health plans with Medicare Advantage contracts are also investing in quality improvements to access federal incentives under the 5-Star Rating system.    The 5-Star system is another method that the government is already mandating to improve the quality of care, provide incentives for high performance and penalties for poor performance.

We expect collisions in these various initiatives, which have overlapping impact and in some cases redundant mandates.

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About the Author:

Michael is Managing Partner & CEO of No World Borders, a leading health care management and IT consulting firm. He leads a team that provides Cybersecurity best practices for healthcare clients, ICD-10 Consulting, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, Insurance Fraud, payor-provider disputes, and consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $4 billion in healthcare mergers and acquisitions. Education: UC Irvine – Economics and Computer Science, University of Southern California – Business, Stanford Medical School – Biomedical Informatics, Harvard Law School – Bioethics.

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