Feds: Keep 2014 PPACA fees out of 2013 loss ratios

By Allison Bell

July 3, 2013

The Center for Consumer Information and Insurance Oversight is giving health insurers advice that could cut the insurers' earnings this year and increase the size of the rebate checks going out to enrollees.

Teresa Miller, acting director of the CCIIO oversight group, issued her advice -- contained in CCIIO Technical Guidance (CCIIO 2013-0003) -- after looking at how insurers should handle fees related to the Patient Protection and Affordable Care Act when they are calculating PPACA medical loss ratios and MLR rebate payment amounts.

The PPACA requires health insurers to spend at least 85 percent of large-group health insurance revenue and 80 percent of individual and small-group health insurance revenue on health care or quality improvement efforts or else make up the difference by sending rebates to the enrollees.

Miller concluded that insurers can include PPACA-related payments, such as a new PPACA care effectiveness research fee and new PPACA risk-management program fees, in their costs only if they have made the payments during the reporting year.

The big PPACA insurer fee requirements take effect in 2014.

When making PPACA MLR and PPACA rebate calculations, "issuers may not exclude ACA  assessments or fees they expect to incur in future MLR reporting years," Miller said in the bulletin.

Federal law "does not provide for estimated regulatory fees for future years  to be deducted from premium used in MLR and rebate calculations for the reporting year,” Miller said.

Questions about how insurers should handle PPACA-related payments have also come up in California, and at the  Health Care Reform Regulatory Alternatives Working Group at the National Association of Insurance Commissioners.

In California, insurance regulators have objected to efforts by some insurers to include reserves for future PPACA fee obligations in current health insurance rates.

Regulators have noted that insurers may have to pay about $20 billion in PPACA-related fees in 2014, or 3 percent of their revenue, and that states need to decide when insurers can include the fees in their premiums.

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