[Federal Register Volume 75, Number 250 (Thursday, December 30, 2010)]
[Rules and Regulations]
[Pages 82277-82279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-32526]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Part 158

[Docket No. HHS-OS-2010-0026]
RIN 0950-AA06


Health Insurance Issuers Implementing Medical Loss Ratio (MLR) 
Requirements Under the Patient Protection and Affordable Care Act; 
Corrections to the Medical Loss Ratio Interim Final Rule With Request 
for Comments

AGENCY: Office of Consumer Information and Insurance Oversight (OCIIO), 
HHS.

ACTION: Correction of interim final rule with request for comments.

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SUMMARY: This document corrects technical errors that appeared in the 
interim final rule with request for comments that appeared in the 
December 1, 2010 Federal Register (FR Doc 2010-29596 (75 FR 74864)) 
entitled ``Health Insurance Issuers Implementing Medical Loss Ratio 
(MLR) Requirements Under the Patient Protection and Affordable Care 
Act.''

DATES: Effective Date: January 1, 2011.

FOR FURTHER INFORMATION CONTACT: Carol Jimenez, (301) 492-4457.

SUPPLEMENTARY INFORMATION:

I. Background

    In the interim final rule with request for comments that appeared 
in the December 1, 2010 Federal Register (FR Doc 2010-29596 (75 FR 
74864)), there were technical and typographical errors that are 
identified and corrected in the Correction of Errors section below. The 
provisions in this correction notice are effective as if they had been 
included in the December 1, 2010 interim final rule with request for 
comments entitled ``Health Insurance Issuers Implementing Medical Loss 
Ratio (MLR) Requirements under the Patient Protection and Affordable 
Care Act.''
    Accordingly, the corrections are effective January 1, 2011.

II. Summary of Errors

    In the regulation text and preamble sections regarding the scope of 
the regulation, on pages 74921 and 74867, respectively, we are 
correcting a typographical error by replacing the Public Health Service 
Act section reference from ``2718(b)(A)(ii)'' to ``2718(b)(1)(A)(ii)''.
    In the regulation text section regarding exceptions to the general 
aggregate reporting requirements (Sec.  158.120(d)) we are making two 
changes. On page 74922 (Sec.  158.120(d)(1)), we are replacing the 
words ``State that has jurisdiction over'' the certificate of coverage, 
which was inadvertently used, with ``issue State of'' the certificate 
of coverage. The correct phrase was inadvertently deleted and should be 
corrected.
    On page 74923 (Sec.  158.120(d)(4)), we are inserting the words 
``non-U.S.'' before ``citizens working in their home country.'' The 
words ``non-U.S.'' were inadvertently omitted and are necessary to make 
clear that this exception does not apply to U.S. citizens working in 
their home country. We have corrected the preamble section on page 
74871 as well to reflect this revision to the text.
    On page 74923 (Sec.  158.140(a)(1)), regarding group conversion 
charges, we are adding a sentence that we inadvertently omitted. The 
sentence clarifies paragraph(a)(1) with respect to an issuer that 
transfers portions of earned premium associated with group conversion 
privileges between group and individual lines of business in its Annual 
Statement accounting.
    Also on page 74923, we are deleting a phrase from Sec. Sec.  
158.140(a)(2) and (3), regarding reimbursement for clinical services 
provided to enrollees. The preamble makes clear we intended to adopt 
the NAIC model regulation language, which does not include this phrase. 
The phrase had appeared in an earlier draft of the NAIC model 
regulation, and was correctly deleted from part of the interim final 
rule, but was inadvertently retained in subparagraphs (a)(2) and (3). 
Because the preamble makes clear that we intended to adopt the NAIC 
model regulation language, and the inconsistency between Sec.  
158.140(a)(1) and Sec. Sec.  158.140(a)(2)and(3) creates an ambiguity 
that may cause confusion, we believe it should be corrected.
    On page 74923, in two subsections regarding adjustments to incurred 
claims (Sec. Sec.  158.140(b)(2) and (4))we are also replacing the 
words ``may'' and ``can'' with the word ``must'' to indicate that such 
adjustments are mandatory. This misuse of ``may'' and ``can'' was 
inadvertent and should be corrected.
    We correct an inadvertent omission in Sec.  158.140(b)(5)(i) on 
page 74924, regarding the choice by affiliated issuers who offer 
blended rates to choose whether to make an adjustment to each 
affiliate's incurred claims and activities to improve health care 
quality to reflect the experience of the issuer with respect to the 
employer as a whole. We

[[Page 82278]]

inadvertently omitted the requirement that if an issuer makes this 
choice, it must apply it for a minimum of 3 MLR reporting years. This 
correction is necessary in order to implement this option accurately.
    We are also correcting an inadvertent discrepancy between the NAIC 
model regulation and the interim final rule regarding the treatment of 
fraud recovery expenses. We are, first, deleting the phrase ``other 
than fraud detection/recovery expenses up to the amount recovered that 
reduces incurred claims'' from Sec.  158.150(c)(8) of the interim final 
rule on page 74925, because in the NAIC model regulation this language 
does not apply to expenses that improve health care quality. We are 
then amending Sec.  158.140(b)(2) of the interim final rule, on page 
74923, to add language from the NAIC model regulation regarding fraud 
recovery expenses. This changes how the fraud recovery amounts in 
question are labeled. The correction has no substantive effect on the 
medical loss ratio calculation. We are also amending the preamble to 
reflect this correction, by deleting two sentences from page 74874 and 
by changing two phrases on page 74876, and by deleting a parenthetical 
on page 74875.
    On page 74925, we are also redesignating Sec.  158.161 as Sec.  
158.162 and revising the section heading from ``Reporting of Federal 
and State licensing and regulatory fees'' to ``Reporting of Federal and 
State taxes.'' On page 74926, we are also revising subparagraph 
(b)(1)(vii)(B) of this newly redesignated section, to add language that 
we inadvertently omitted. In addition, we are adding a new Sec.  
158.161 to replace text that had been unintentionally deleted, but 
referenced in the preamble.
    We are adding the words ``or non-credible'' after ``partially 
credible'' in Sec.  158.231(c)(2) on page 74928, which were 
inadvertently omitted. Adding these words is consistent with other 
sections of the regulation and is consistent with the preamble section 
on page 74882 regarding this subject.
    Finally, we are correcting several typographical errors that appear 
in Table 2 to Sec.  158.232 and in the preamble regarding Table 2, on 
pages 74928 and 74882 respectively.

III. Waiver of Proposed Rulemaking and Waiver of the Delay in Effective 
Date

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register to provide a period for public comment before the 
provisions of a rule take effect in accordance with Sec.  553(b) of the 
Administrative Procedure Act (APA) (5 U.S.C. 553(b)). However, we can 
waive this notice and comment procedure if the Secretary finds, for 
good cause, that the notice and comment process is impracticable, 
unnecessary, or contrary to the public interest, and incorporates a 
statement of the finding and the reasons therefore in the notice.
    Section 553(d) of the APA (5 U.S.C. 553(d)) ordinarily requires a 
30-day delay in effective date of final rules after the date of their 
publication in the Federal Register. This 30-day delay in effective 
date can be waived, however, if an agency finds for good cause that the 
delay is impracticable, unnecessary, or contrary to the public 
interest, and the agency incorporates a statement of the findings and 
its reasons in the rule issued.
    This document merely corrects typographical and technical errors 
made in the MLR interim final rule with request for comments published 
in the Federal Register on December 1, 2010 (FR Doc. 2010-29596) under 
the Patient Protection and Affordable Care Act, which will be effective 
on January 1, 2011. The corrections contained in this document are 
consistent with and do not make substantive changes to the policies 
adopted in the MLR interim final rule with request for comments. The 
preamble to the MLR interim final rule with request for comments 
correctly refers to and discusses the substance of the sections 
affected by this technical correction and the table of contents 
correctly refers to the section headings that are the subject of this 
technical correction. Therefore, we find for good cause that it is 
unnecessary and would be contrary to the public interest to undertake 
further notice and comment procedures to incorporate these corrections.
    For the same reasons, we are also waiving the 30-day delay in 
effective date for these corrections. We believe that it is in the 
public interest to ensure that the Interim Final Rule setting forth 
Health Insurance Issuers Implementing Medical Loss Ratio (MLR) 
Requirements accurately states our policies as of the date they take 
effect. Therefore, we find that delaying the effective date of these 
corrections beyond the effective date of the MLR interim final rule 
with request for comments would be contrary to the public interest. In 
doing so, we find good cause to waive the 30-day delay in the effective 
date.

IV. Correction of Errors

    In 75 FR 74864, FR Doc 2010-29596, published December 1, 2010, make 
the following corrections:

A. Correction of Errors in the Preamble

    1. On page 74867, second column, first full paragraph, line 3, the 
citation 2718(b)(A)(ii) is corrected to read ``2718(b)(1)(A)(ii)''.
    2. On page 74871, third column, first paragraph, line 20, the term 
``citizens'' is corrected to read ``non-U.S. citizens''.
    3. On page 74874, first column, second full paragraph, line 22 
through the second column, line 2, after the phrase ``conversion 
policies.'', the second full paragraph is corrected by deleting the two 
sentences beginning with the phrase ``Incurred claims'' and ending with 
the phrase ``quality improving activities'', without inserting any 
additional language.
    4. On page 74875, third column, last partial paragraph, lines 2 and 
3, after the phrase ``(3) Fraud Prevention activities'' at line 1, the 
last partial paragraph is corrected by deleting ``(beyond the scope of 
those activities which recover incurred claims),'' without inserting 
any additional language.
    5. On page 74876--
    a. In the third column--
    (1) In the first partial paragraph, lines 9-15 are corrected by 
deleting the phrase ``and fraud recovery activities up to the amount of 
fraudulent claims recovered'', without inserting any additional 
language.
    (2) In the first full paragraph, line 11, the phrase ``a quality 
improving activity'' is corrected to read ``an adjustment to claims''.
    6. On page 74882, Table 2, the term ``$0'' in the first line of the 
``Deductible'' column on the left side of Table 2 is corrected to read 
``<$2,500''.

B. Correction of Errors to the Regulation Text

0
1. On page 74921, third column, second full paragraph (Sec.  
158.101(b)), line 26, the citation 2718(b)(A)(ii) is corrected to read 
``2718(b)(1)(A)(ii)''.

0
2. On page 74922, third column, first full paragraph from the bottom of 
the page (Sec.  158.120(d)(1)), line 5, the phrase ``State that has 
jurisdiction over'' is corrected to read ``issue State of''.

0
3. On page 74923--
0
a. In the first column, second full paragraph (Sec.  158.120(d)(4)), 
line 8, the term ``citizens'' is corrected to read ``non-U.S. 
citizens''.
0
b. In the second column--
0
(1) In the fourth full paragraph from the bottom of the page (Sec.  
158.140(a)(1)), paragraph (a)(1) is corrected by adding the following 
sentence at the end of it: ``If an issuer transfers portions of earned 
premium associated with group conversion privileges between group and 
individual lines of business in its

[[Page 82279]]

Annual Statement accounting, these amounts must be added to or 
subtracted from incurred claims.''
0
(2) In the third full paragraph from the bottom of the page (Sec.  
158.140(a)(2)), lines 2 and 3, paragraph (a)(2) is corrected by 
deleting the phrase ``changes in unpaid claims between the prior year's 
and''.
0
(3) In the second full paragraph from the bottom of the page (Sec.  
158.140(a)(3)), lines 1 through 5 are corrected by deleting the phrase 
``the change in'' following ``Incurred claims must include'' and by 
deleting the phrase ``from the prior year to the current year. Except 
where inapplicable, the reserve should be'' following the phrase 
``claims incurred but not reported''.
0
c. In the third column--
0
(1) In the fifth full paragraph (Sec.  158.140(b)(2)), line 1, the term 
``may'' is corrected to read ``must''.
0
(2) After Sec.  158.140(b)(2)(iii), line 20, paragraph (b)(2) is 
corrected by adding the following paragraph: ``(iv) The amount of 
claims payments recovered through fraud reduction efforts not to exceed 
the amount of fraud reduction expenses.''
0
(3) In the fourth full paragraph from the bottom of the page (Sec.  
158.140(b)(4)), line 1, the term ``can'' is corrected to read ``must''.

0
4. On page 74924, first column, first partial paragraph (Sec.  
158.140(b)(5)(i)), line 14 (immediately following the term 
``aggregate.''), paragraph (b)(5)(i) is corrected by adding the 
following sentence: ``An issuer that chooses to use such an adjustment 
must use it for a minimum of three MLR reporting years.''

0
5. On page 74925--
0
a. In the first column, third full paragraph (Sec.  158.150(c)(8)), 
lines 1 through 4, (after the phrase ``Fraud prevention activities''), 
paragraph (c)(8) is corrected by deleting the phrase ``, other than 
fraud detection/recovery expenses up to the amount recovered that 
reduces incurred claims''.
0
b. In the third column--
0
(1) After the eighth full paragraph (Sec.  158.160(b)(2)(vi)), lines 31 
and 32, the sentence ``Sec.  158.161 Reporting of Federal and State 
licensing and regulatory fees'' is corrected to read ``Sec.  158.162 
Reporting of Federal and State taxes''.
0
(2) After the eighth full paragraph (Sec.  158.160(b)(2)(vi)) and 
before the corrected sentence ``Sec.  158.162 Reporting of Federal and 
State taxes'', on line 31, add the following paragraphs:
    ``Sec.  158.161 Reporting of Federal and State licensing and 
regulatory fees.
0
(a) Licensing and regulatory fees included. The report required in 
Sec.  158.110 must include statutory assessments to defray operating 
expenses of any State or Federal department, and examination fees in 
lieu of premium taxes as specified by State law.
0
(b) Licensing and regulatory fees excluded. The report required in 
Sec.  158.110 must include fines and penalties of regulatory 
authorities, and fees for examinations by any State or Federal 
departments other than as specified in Sec.  158.161(a) as other non-
claims costs, but not as an adjustment to premium revenue.''

0
6. On page 74926, first column, fifth paragraph (Sec.  
158.161(b)(1)(vii)(B)), line 10 is corrected by adding the phrase 
``made due to a'' before the phrase ``State based requirement''.

0
7. On page 74928--
0
a. In the first column, third full paragraph (Sec.  158.231(c)(2)), 
line 3, the sentence is corrected by adding the phrase ``or non-
credible'' after the phrase ``partially credible''.
0
b. In the second column, after the third full paragraph (Sec.  
158.232(c)(2)), the term ``$2,500'' in the first line of the ``Health 
plan deductible'' column on the left side of Table 2 is corrected to 
read ``<$2,500''.

    Dated: December 17, 2010.
Dawn L. Smalls,
Executive Secretary to the Department.
[FR Doc. 2010-32526 Filed 12-29-10; 8:45 am]
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