UPMC Health Plan is dedicated to providing all of our members with the highest quality, affordable health insurance coverage. We are also committed to maximizing the portion of premiums spent on medical services, and we view the new Affordable Care Act reporting requirements as an opportunity to demonstrate UPMC Health Plan's excellence within the health insurance industry.

Medical loss ratio reporting requirement

Health insurers are now required to collect annual medical loss ratio (MLR) data. Data for 2011 will be reported to the U.S. Department of Health and Human Services in June 2012. Medical loss ratio, in simplest terms, is the percentage of premium dollars used to cover medical costs and certain quality improvement activities. Under the new law, insurers will be required to spend at least 80 percent of premiums on clinical care for small group plans and individual plans and at least 85 percent for large group plans. If they fail to meet these requirements, health insurers will be required to issue rebates to members.

Report content and timing: MLR reports are generally aggregated by market. In most cases, a health insurer will report a unique MLR for each of the individual, small group, and large group markets. 2011 MLR reports must be filed by June 1, 2012, and data for health insurers in every state will be available online.

Reports will include each of the following:

• Amount of premiums collected
• Cost of claims paid
• Clinical quality improvement expenditures
• Non-claims and administrative costs

MLR Rebates: Any applicable rebates must be issued to group plan policyholders (or to members with coverage in the Individual market) by August 1 for the previous year (e.g., 2011 rebates are due by August 1, 2012). The amount of any rebate is based on the amount of premiums paid and the extent to which a health insurer's MLR was too low. Any plan member who receives a rebate will also receive a letter describing the circumstances of the rebate. In most cases, rebates will be distributed by a group plan member's employer.

Premium rate review reporting requirement

The ACA requires the Secretary of Health and Human Services, in conjunction with the states, to establish a process for the ongoing review of increases in insurance rates, sometimes referred to as premiums (see below for the difference between “rates” and “premiums”). Effective September 1, 2011, any proposed rate increase that results in a total increase of more than 10 percent during the year will be reviewed by state and/or federal regulators to ensure that the increase is reasonable. Information on reviewed rates, including data on costs and a narrative explanation of the proposed increase, will be publicly available in a consumer-friendly format. The purpose of this review is to make the health insurance marketplace more transparent and ensure that consumers have access to easy-to-understand information on the underlying factors that contribute to rate increases and premium costs.

Critical to this process is the determination of whether a state has an “effective rate review program” based on its existing review process. States certified as having effective rate review programs will be responsible for conducting reviews and reporting their findings to federal agencies under this program. In July 2011, the Center for Consumer Information and Insurance Oversight (CCIIO) made its determination on Pennsylvania's rate review processes. Based on federal criteria, Pennsylvania currently has an “effective rate review program” in place for the individual market but does not meet all of the criteria for conducting these reviews in the small group market. Health insurers in Pennsylvania will be required to submit any proposed rate increases in the small group market for review by the U.S. Department of Health and Human Services until Pennsylvania amends its laws or regulations to meet the new federal standards.

Update: Pennsylvania recently enacted legislation amending its rate review program. It is anticipated that in the near future Pennsylvania will be deemed to have an “effective rate review” program, at which time the Pennsylvania Insurance Department will retain all responsibility for reviewing insurance rates in Pennsylvania.

• It is important to note that a "rate" is a base price for health benefits, while a "premium" is the specific amount charged to covered groups and individuals. Depending upon a number of different variables, actual premiums for covered individuals and groups may be higher or lower than a filed rate.
• In future years, the 10 percent threshold may be replaced by state-specific thresholds that better reflect the underlying costs and health care trends within each state.
• Any insurer implementing a rate increase that has been determined to be "unreasonable" will be required to provide additional disclosures and justification for that increase.
• Beginning in 2014, a state may exclude health plans that have demonstrated a pattern of unreasonable increases from participating in its Health Insurance Exchange.

Quality of care reporting requirement

Under the Affordable Care Act, health plans will be required to collect and submit information on an annual basis to both the U.S. Department of Health and Human Services (HHS) and plan members (both current and prospective) about how the health plan's benefits and provider reimbursement policies satisfy new requirements and improve the quality of care for members. HHS is expected to develop reporting requirements by March 2012, but we already know that this annual report must include information about:

1. Case management, care coordination, chronic disease management, and medication/care compliance initiatives, including the use of the medical home model;
2. Comprehensive hospital discharge program to prevent readmissions through patient-centered education and counseling, comprehensive discharge planning, and post-discharge reinforcement;
3. Activities to improve patient safety and reduce medical errors through best clinical practices, evidence-based medicine, and health information technology; and
4. Wellness and health promotion activities.

UPMC Health Plan has long been dedicated to providing quality health and wellness programs to its members and to tracking and trending quality outcomes. UPMC Health Plan will continue to develop and implement new strategies to improve quality of care and to report the outcome of those strategies. This new reporting requirement applies to all individual, group, fully insured, and self-funded plans, except grandfathered plans; grandfathered plans are exempt from this provision.