CMS Bulletin: Treatment of Risk Corridors Recovery Payments in the Medical Loss Ratio and Rebate Calculations (Dec. 30, 2020)
CMS has advised that insurers must revise their medical loss ratio (MLR) and rebate calculations and pay recipients additional rebate amounts based on any recovered risk corridor payment amounts. As background, MLR and rebate calculations must account for, among other things, the net payments or receipts related to the federally administered risk corridors program, which provided for payments to insurers in the individual and small-group markets to mitigate the effects of inaccurate rate setting in qualified health plans in the first three years of the Affordable Care Act (ACA) Exchanges (2014–2016). When the government failed to make payments under the program, several insurers sued and after extensive litigation the U.S. Supreme Court held that the ACA obligated the government to pay insurers the full amount set forth in the program despite appropriations legislation limiting the program’s funding (see our Checkpoint article). For insurers that initially reported less than the full calculated risk corridor payment and subsequently receive recovered risk corridor payments as a result of the litigation, the MLR reports filed for the 2015–2018 reporting years no longer accurately reflect the risk corridor payments received.
According to the guidance, within 150 days of receiving recovered risk corridor payments (or publication of the guidance, whichever is later) insurers with a higher rebate obligation must (1) submit to CMS a revised MLR reporting form for the 2015–2018 reporting years for each state, market, and year in which the insurer has a greater rebate liability based on inclusion of the recovered risk corridor payment; and (2) pay the outstanding rebate amounts to recipients based on the year in which coverage was received (not the year in which insurers receive recovered risk corridor payments). Recipients generally are enrollees for policies in the individual market and policyholders for policies issued in the group market (typically the employer-plan sponsor, or in some cases a group health plan or trust). The additional rebate disbursements must include a notice explaining to recipients why they are receiving a rebate or an additional rebate—sample notices tailored to different scenarios are included with the bulletin.
EBIA Comment: Although the obligations to calculate the MLR and make rebates fall on insurers, in many cases the rebates will be paid to employer-plan sponsors (or plans), who will be required to determine how to use the rebates or refund them to plan participants. Rebates may be ERISA plan assets; a sample notice for group health plans includes a link to relevant DOL guidance. Given that more than $12 billion dollars in risk corridor payments for 2014–2016 were at stake in the litigation, many employers and plans could be receiving payments. For more information, see EBIA’s Health Care Reform manual at Sections XIV.G (“Medical Loss Ratio (MLR) Requirements”) and XX.D (“Risk Corridors”).
Contributing Editors: EBIA Staff.