McDonald's and other employers that offer low-value "mini-med" health plans to 1.4 million workers will temporarily be allowed to keep them under highly anticipated federal regulations released Monday.
The regulations define one of the most important consumer protections of Democrats' healthcare reform law: the requirement that insurers spend a minimum portion of premium dollars on care, also known as the medical loss ratio (MLR). The regulations aim to guarantee that consumers get value for their money, but some employers — McDonald's chief among them — had warned that they'd drop their mini-med plans if they were obliged to comply immediately with the requirement.
The federal rules closely track regulations adopted last month by the National Association of Insurance Commissioners and offer few surprises beyond spelling out how employers and states can apply for special treatment. The reform law requires plans to spend at least 80 percent of premiums on care (85 percent in the large-group market) or offer consumers rebates starting in 2012.
The provision guarantees that Americans' ever-increasing premiums pay for care rather than insurer overhead such as executives' salaries and marketing. The government estimates as many as 9 million Americans could be eligible for rebates worth as much as $1.4 billion in 2012.
The regulations also require that insurers make public where they're spending their customers' premium dollars.
"In the future," said Lynn Quincy of Consumers Union, "it won't take a congressional investigation to see how your premium dollars are being spent on medical care."
Plans that fail to meet reporting and rebate requirements will be fined $100 a day per individual affected by the violation. The regulation is open for public comment for 60 days before it takes effect.
Mini-med plans, which offer low premiums but limited coverage — sometimes as low as $2,000 a year — are granted special treatment until 2014, when consumers will get sliding-scale subsidies to buy broader, government-regulated coverage. In 2011, issuers of mini-med plans will be required to collect data on their plans and in 2012 and 2013 they might be able to apply for an adjustment to the MLR requirement.
The new regulations offer other modifications to avoid disrupting the insurance markets before 2014:
• expatriate plans, which cover U.S. citizens working abroad, will also get special treatment until 2014;
• small plans (between 1,000 and 75,000 enrollees) will be allowed a "credibility adjustment" of a certain number of percentage points to help them meet the requirements while the smallest plans (fewer than 1,000 enrollees) will be exempt;
• new plans — those getting half or more of their premium income from policies that are less than a year old — are eligible to delay reporting by a year; and
• plans that cover employers who have employees in different states don't have to aggregate their policies by state for purposes of calculating their MLR.
In addition, states have 60 days to apply for an adjustment if they can demonstrate that meeting the 80 percent MLR requirement would destabilize their individual market; that includes demonstrable harm to consumers' access to agents and brokers. Four states — Maine, Iowa, South Carolina and Georgia — have so far requested an adjustment.
Otherwise, the regulation tracked closely with the NAIC's recommendations, notably in terms of the taxes insurers can subtract; Democratic committee chairmen had asked for a more restrictive definition, making it harder to reach the MLR ratio.