Minimum medical loss ratio requirements for Medicaid and CHIP managed care plans

(a)

Minimum medical loss ratio requirements for Medicaid and CHIP managed care plans

Section 1903(m) of the Social Security Act (42 U.S.C. 1396b(m)) is amended—(1)in paragraph (2)(A)—(A)by striking and at the end of clause (xii);(B)by realigning the left margin of clause (xiii) so as to align with the left margin of clause (xii) and by striking the period at the end of clause (xiii) and inserting ; and; and(C)by adding at the end the following new clause:

(xiv)such contract provides that if the Secretary determines for a contract year (beginning on or after October 1, 2017) that the entity has failed to have a medical loss ratio, as determined in accordance with paragraph (3), of at least .85 (.80 in the case of an entity in which at least 10 percent of the individuals enrolled in the plan are optional targeted low-income children described in section 1905(u)(2)(B))—(I)the entity shall remit (not later than January 1 of the first calendar year that begins on or after the first day of the contract year) to the State an amount equal to the product of the total revenue of the entity under the State plan under this title (or under a waiver of such plan) for the contract year and the difference between .85 (or .80, if applicable) and the medical loss ratio (as so determined) and that any such remittances paid by an entity shall be treated as an overpayment under section 1903(d)(3)(A);(II)for 3 consecutive contract years, the State shall not permit the enrollment of new enrollees with the entity for coverage during the second succeeding contract year; and(III)the State shall terminate the contract if the entity fails to have such a medical loss ratio for 5 consecutive contract years.

; and

(2)by inserting after paragraph (2), the following:

(3)(A)For purposes of paragraph (2)(A)(xiv), the medical loss ratio for an entity with a contract under this subsection shall be equal to the ratio of—(i)the sum of the amount of contract revenue (as determined in accordance with subparagraph (B)) expended by the entity—(I)for providing medical assistance to individuals who are eligible under the State plan under this title or under a waiver of such plan and who are enrolled with the entity; and(II)for quality improvement activities (as determined in accordance with subparagraph (C)); to(ii)the total amount of contract revenue (as determined in accordance with subparagraph (B)).(B)For purposes of subparagraph (A), the Secretary shall by regulation specify how contract revenue shall be determined with respect to an entity with a contract with the State under this subsection and a contract year. The regulations shall provide that the following shall be disregarded from the determination of contract revenue for a contract year:(i)(I)Only in the case of an entity that is exempt from Federal income tax, community benefit expenditures made by the entity (not to exceed the limit described in subclause (II)) and reserve funds (not to exceed the limit described in subclause (IV)).(II)The limit described in this subclause is the amount equal to 3 percent of the contract revenue for the contract year or the amount equal to the product of the highest premium tax rate in the State and the contract revenue, whichever is greater.(III)In this clause, the term community benefit expenditures means expenditures for activities or programs that seek to achieve the objectives of improving access to health services, enhancing public health, and relieving government burden.(IV)The limit described in this subclause is the amount equal to 3 percent of the contract revenue for the contract year except that an entity that is exempt from Federal income tax may increase the amount of reserve funds to be disregarded for a contract year up to a limit that does not exceed the amount equal to the sum of 3 percent of the contract revenue for the contract year and the total amount of the reserve funds disregarded for the 2 preceding contract years or 9 percent of the contract revenues during such 3-year period, whichever is greater.(ii)Expenditures for providing medical assistance to a new beneficiary population enrolled with the entity for the first 2 contract years of such population's enrollment.(C)(i)For purposes of subparagraph (A), quality improvement activities are activities designed to do any of the following:(I)To improve health outcomes by implementing activities such as effective case management, care coordination, quality reporting, chronic disease management or medication and care compliance activities.(II)To prevent hospital readmissions, including a comprehensive program for hospital discharge that includes patient education and counseling, discharge planning, and post-discharge follow-up by an appropriate health care professional.(III)To improve patient safety and reduce medical errors through the use of best clinical practices, evidence-based medicine, and health information technology.(IV)To implement a significant investment (as defined by the Secretary and based on a 2-year average of expenditures) in technology improvements such as through electronic medical records, telemedicine, and smart phone or tablet technology.(V)To implement wellness and health promotion activities, including programs designed to address the social determinants of health (as defined in clause (iii)(I)) or to promote patient engagement (as defined in clause (iii)(II)).(ii)For purposes of subparagraph (A), an expenditure only shall be considered to be an expenditure for a quality improvement activity if the expenditure satisfies 1 or more of the following requirements:(I)The expenditure is designed to improve healthcare quality.(II)The expenditure is designed to increase the likelihood of desired health outcomes in ways that can be objectively measured, and that can produce verifiable results and achievements.(III)The expenditure is directed toward individual enrollees, incurred for specific segments of enrollees, or provides health improvements to a population beyond the population enrolled in coverage with the entity so long as no additional costs are incurred due to the non-enrollees.(IV)The expenditure is grounded in evidence based medicine (including promising practices which, with documented justification, go beyond the existing evidence base), or widely accepted best clinical practice, or criteria issued by recognized professional medical associations, accreditation bodies, government agencies, or other nationally recognized health care quality or health improvement organizations.(iii)(I)For purposes of clause (i)(IV), the term social determinants of health means conditions in the environments in which people are born, live, learn, work, play, worship, and age; that affect a wide range of health, functioning, and quality-of-life outcomes, risks, patterns of social engagement and sense of security and well-being, and have a significant influence on population health outcomes. These conditions include, but are not limited to, safe and affordable housing, access to education, public safety, availability of healthy foods, local emergency and local health services, and environments free of life-threatening toxins.(II)For purposes of clause (i)(IV), the term patient engagement means actions individuals must take to obtain the greatest benefit for the health care services available to them, and through which process an individual harmonizes robust information and professional advice with the individual's own needs, preferences and abilities in order to prevent, manage and cure disease.(D)The Secretary may waive the application of a requirement of this paragraph or of paragraph (2)(A)(xiv) to a Medicaid managed care organization for not more than 2 years, based on the following:(i)The extent to which the organization is likely to cease offering coverage without the waiver.(ii)The number of individuals in the plan likely to be affected by loss of coverage.(iii)The impact of the loss of coverage on the ability of the beneficiaries to receive coverage under another plan and to have continuity of care.(iv)The impact on the rates calculated for other Medicaid managed care organizations that would provide coverage for the beneficiaries that would be affected by the termination of coverage.(v)Upon the request of a Medicaid managed care organization, to permit implementation of major plan changes (but only for 1 contract year).(vi)Any other relevant information submitted by the Medicaid managed care organization or the State.

(b)

Application to managed care plans under CHIP

Section 2103(f)(3) of such Act (42 U.S.C. 1397cc(f)(3)) is amended—(1)by inserting subsection (m)(2)(A)(xiv) of section 1903 (relating to minimum medical loss ratio requirements, except that the minimum medical loss ratio applicable to managed care organizations under this title shall be .80) and after application of; and(2)by inserting other before requirements for.(c)

Regulations

Not later than October 1, 2015, the Secretary of Health and Human Services shall promulgate regulations implementing the amendments made by this section. The regulations shall require that initial test reporting of medical loss ratios by Medicaid managed care organizations be made not later than October 1, 2016.