2012 0326 Responses to Comments for OMB FINAL-508

Responses to Comments Received
Federal Register Notice on Revised CMS-10418

Table of Contents
Introduction ................................................................................................................................. 1
Comments and Responses Regarding the MLR Annual Reporting Form .................................. 2
Comments and Responses Regarding MLR Rebate Notices and Sample MLR Information
Notice ........................................................................................................................................ 16

Introduction
CMS received 27 public comments regarding the Medical Loss Ratio (MLR) PRA package
published in the Federal Register on December 16, 2012 (76 FR 78265), and amended on
February 16, 2012 (77 FR 9931). The original comment period closed on February 14, 2012, but
on February 16 was reopened until March 2, 2012 to accommodate comments on amendments to
the PRA package.
The PRA package contained two different collections of information: the MLR Annual
Reporting Form that issuers must file with CMS each year on June 1, beginning June 1, 2012;
and Notices of rebates that issuers must send to subscribers and policyholders each year no later
than August 1, beginning August 1, 2012. In addition, the PRA package contained a sample
notice and instructions for what a notice might contain if CMS were to issue a rule requiring
notice of MLR information when an issuer meets or exceeds the MLR standard.
The comments CMS received regarding the MLR Annual Reporting Form and Instructions are
summarized immediately below. Following that is a summary of the comments CMS received
regarding the MLR Notices to consumers. Most of the comments addressed multiple issues
within the MLR Annual Reporting Form and Instructions, or within the Notices to consumers
and Instructions. The summary below sets forth the comment regarding each issue addressed,
rather than summarizing each public comment in total.

1

Responses to Comments Received
Federal Register Notice on Revised CMS-10418

Comments and Responses Regarding the MLR Annual Reporting Form
Comment 1
CMS received numerous comments pertaining to technical formula errors, typographical errors,
minor inconsistencies, and improper cell references in the MLR Form (an Excel spreadsheet) and
in the accompanying Instructions.
Response 1
Corrections related to such comments do not change the data nor the substance of what is being
reported, but will make it easier for health insurance issuers to complete the MLR Form. Due to
the abundance and nature of these comments, CMS will not provide an individual response to
each of these comments. However, CMS did accept most of these comments and made the
appropriate changes to the MLR Form.
Comment 2
Several issuers suggest clarification regarding the years for which the Instructions are applicable.
Response 2
The Instructions are being revised to indicate that they apply only to an issuer’s 2011 MLR
experience. Instructions for 2012 and beyond will be issued at a later date.
Comment 3
Commenters support allowing issuers to allocate administrative costs on a pro-rata basis to
affiliated entities. However, the commenters assert that the instruction is unclear.
Response 3
The instruction is being revised to clarify that an entity may allocate administrative costs to only
those affiliated entities that benefit from the allocated expenses.
Comment 4
Regarding MLR experience in States that have been granted an adjustment to the MLR standard
in the individual market, commenters request clarification for how MLR experience will be
calculated for reporting years beyond 2011 when an issuer’s MLR experience will be based on a
multi-year average. Specifically, commenters request that that a weighted average used for those
years.

2

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 4
The Instructions are being revised to clarify that the Instructions apply only to the reporting of
2011 MLR experience. Guidance on this comment is required only for future MLR reporting
years. Instructions for 2012 and beyond will be issued at a later date.
Comment 5
On Part 1 of the MLR Form, commenters propose eliminating reporting the experience not
subject to the MLR standard. This experience is captured in columns 32-35: Government
Programs Plans, Other Health Business, Aggregate 2% Rule, and Uninsured Plans.
Response 5
A change is not required. This data is required to validate the issuer’s submission. This
submission is consistent with the National Association of Insurance Commissioners (NAIC)
Supplemental HealthCare Exhibit (SHCE), which the NAIC developed in conjunction with its
model MLR recommendations to the Secretary, pursuant to section 2718 of the Public Health
Service Act (PHS Act).
Comment 6
A commenter suggests that an issuer be allowed to make an adjustment to premium to reflect
retroactive adjustments made after December 31 of the MLR reporting year.
Response 6
A change is not required. Any adjustments to premium will be captured in the subsequent MLR
reporting year, as reported in Part 2 Line 1.9 (Premium Balances Written Off). This method is
consistent with the SHCE.
Comment 7
A commenter suggests that with respect to “employer business issued through an association,”
the instruction pertaining to the determination of the appropriate market is potentially
inconsistent with guidance that is contained in the September 1, 2011, CMS Insurance Standards
Bulletin. The commenter states that while the Bulletin provides for specific treatment of
“business issued through an association,” where the association itself is deemed to be employer,
the instruction is silent on this issue.
Response 7
The instruction is consistent with the September 1 Bulletin. The September 1 CMS Bulletin
provides guidance to issuers regarding how to properly report the experience from policies
issued through an association, even in the rare instance where the association of employers is
sponsoring the group health plan and the association itself is deemed the employer. The Bulletin
states:

3

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
CMS believes that, in most situations involving employment-based association
coverage, the group health plan exists at the individual employer level and not at
the association-of-employers level. In these situations the size of each individual
employer participating in the association determines whether that employer’s
coverage is subject to the small group market or the large group market rules. In
the rare instances where the association of employers is, in fact, sponsoring the
group health plan and the association itself is deemed the “employer,” the
association coverage is considered a single group health plan. In that case, the
number of employees employed by all of the employers participating in the
association determines whether the coverage is subject to the small group market
or the large group market rules.
Comment 8
A commenter notes that page 2 of the Instructions does not elaborate on how the minimum threeyear reporting of “dual contract group health coverage” would operate beyond 2011.
Specifically, the commenter suggests that CMS clarify that the “three year reporting
requirement” is not a requirement that permanently locks the issuer into this method.
Response 8
The Instructions are being revised to clarify that the “three year reporting requirement” begins
with the year the issuer adopts the method. The “three year reporting requirement” is not
permanent and may be discontinued upon completion of three consecutive years of reporting.
Comment 9
Regarding the aggregation of business through a multiple employer welfare arrangement
(MEWA), a commenter states that the instruction (page 3) is inconsistent with guidance
contained in the September 1, 2011, CMS Insurance Standards Bulletin. The commenter states
that while the instruction treats MEWA business differently from association business, the
bulletin treats MEWAs as associations.
Response 9
The MLR regulation, at 45 CFR §158.120, does not address reporting for group associations
other than a “multiple employer welfare arrangement” (MEWA). The MLR regulation permits
issuers to report MEWA experience either where the MEWA has its principal place of business
or where each member employer is located. The September 1, 2011 CMS Insurance Bulletin
states that private group health plan coverage, including group health coverage provided through
MEWAs, is subject to the Employee Retirement Income Security Act (ERISA). Therefore, if a
group association meets ERISA’s MEWA requirements, then issuers should file as indicated in
the regulation. But, if a group association is not a MEWA pursuant to ERISA, then each
employer should be issued a policy and the September 1, 2011 CMS Insurance Bulletin directs
issuers to look beyond the association to determine the size of each employer. CCIIO expects
issuers to file MLR reports for each State and market where each employer-member of the
association is located.

4

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Comment 10
A commenter notes that the method used for calculating average family deductibles contained in
the MLR Interim Final Rule (IFR) at section 158.232(c) is actuarially flawed.
Response 10
The Instructions are being revised to clarify the methodology to be used in the calculation of the
average family deductible. The average deductible for a policy that covers a subscriber and the
subscriber’s dependents shall be the lesser of the deductible applicable to each of the individual
family members or the overall family deductible for the subscriber and subscriber’s family
divided by two (regardless of the total number of individuals covered through the subscriber).
Comment 11
Regarding the instructions for Line 2.15 (Blended Rate Adjustment), a commenter suggests that
CMS clarify that the blended rates for multi-option coverage should be aggregated for all dualchoice groups together rather than performed on a group-by-group basis.
Response 11
The instruction for Line 2.15 is being revised to state that “affiliated issuers that choose to make
such an adjustment must do so for all policies with blended rates in the applicable market.” This
method is consistent with 45 CFR § 158.140(b)(5)(i) and with the SHCE.
Comment 12
Regarding page 4 of the Instructions (Business as of 12/31 of Current MLR Reporting Year), a
commenter suggests that CMS clarify whether the experience that is to be reported in the 12/31
column should include experience for the current MLR reporting year regardless of incurred
date, or whether it should include experience with incurral dates only within the MLR reporting
year.
Response 12
The Instructions are being revised to indicate that the information to be reported in the 12/31
columns should represent issuer experience for each of the relevant markets for the MLR
reporting year regardless of incurred date as reported to the department of insurance in the
issuer’s State of domicile or as filed on the SHCE.
Comment 13
Regarding page 4 of the Instructions (Business as of 3/31 of Subsequent MLR Reporting Year), a
commenter suggested that CMS clarify whether the paragraph that references “actuarial
elements” applies only to subsequent claims activity or whether it also applies to premium fields.

5

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 13
The instruction for this item is being revised to reference “actuarial elements related to claims.”
Comment 14
Regarding page 18 of the Instructions (Claims Paid Line 2.1), two commenters suggest that CMS
indicate which expenses should be added or subtracted from claims paid.
Response 14
The instruction for this item is being clarified.
Comment 15
Regarding page 18 of the Instructions, a commenter suggests that CMS revise the instruction for
“Claims Paid Line 2.1” to indicate that incentive and bonus payments to providers should only
be included in Line 2.11. As published, the instructions for both lines 2.1 and 2.11 allow
incentives and bonuses payments to be included.
Response 15
The instruction for this item is being revised to reflect that incentive and bonus payments to
providers should only be included in Line 2.11.
Comment 16
Regarding page 18 of the Instructions (Claims Paid Line 2.1), a commenter requests that CMS
remove “ex gratia” payments from the list of items excluded from claims paid.
Response 16
To remain consistent with 45 CFR § 158.140, the instruction for Line 2.1 is being revised to
remove the reference to “ex-gratia” payments.
Comment 17
Regarding the first paragraph of page 19 of the Instructions, a commenter requests that CMS
clarify whether “payments to and from unsubsidized State programs designed to address the
distribution of health risks across issuers via charges to low risk issuers that are distributed to
high risk issuers” must be included in or deducted from incurred claims.
Response 17
We have used the term “adjustments that must be either included in or deducted from” because
payments to such State programs would be included in incurred claims and payments from such
State programs would be deducted from incurred claims. We have clarified this instruction to
make this clear.

6

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Comment 18
Regarding page 19 of the Instructions, several commenters suggest that CMS clarify whether
premium deductions for community benefit expenditures (CBE) are limited to not-for-profit
health issuers for the 2011 MLR reporting year. The instruction for Line 3.2c indicates that the
deduction of CBE from premium is limited to not-for-profit health issuers for the 2011 MLR
Reporting year.
Response 18
The MLR Interim Final Rule (IFR), published December 1, 2010, applies to an issuer’s 2011
MLR experience and allows only not-for-profit health issuers to deduct community benefit
expenditures from premium. The provision in the MLR Final Rule (FR), published December 7,
2011, which allows all issuers to deduct either State premium taxes or community benefit
expenditures from premium, applies to an issuer’s 2012 MLR experience and beyond. The
Instructions are being revised to clarify that the Instructions apply only to the reporting of 2011
MLR experience. Instructions for 2012 and beyond will be issued at a later date.
Comment 19
Several commenters note that the Instructions use the terms “comprehensive major medical” and
“comprehensive health coverage” interchangeably. The commenters suggest that CMS clarify its
intent as these terms might have different meanings in different contexts.
Response 19
The Instructions are being revised to replace “comprehensive major medical” and
“comprehensive health coverage” with the term “health insurance coverage.” The term “health
insurance coverage” is the term used in the Public Health Service (PHS) Act and means benefits
consisting of medical care (provided directly, through insurance or reimbursement, or otherwise
and including items and services paid for as medical care) under any hospital or medical service
policy or certificate, hospital or medical service plan contract, or health maintenance
organization contract offered by a health insurance issuer. The definition includes any insurance
product, such as drug, chiropractic, or mental health coverage, whether sold as a stand-alone
product or in conjunction with any other health insurance coverage, unless specifically identified
as “excepted benefits” by section 2791 of the PHS Act.
Comment 20
Regarding page 20 of the Instructions (Direct Contract Reserve Line 2.6), several commenters
oppose limiting contract reserves to only age-related prefunding expenses. They suggest that
doing so is contrary to industry practice and the NAIC intention.
Response 20
The instructions are being revised to delete this limitation if an issuer’s contract reserves were
not limited in this way prior to 2011.

7

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Comment 21
Regarding page 4 of the Instructions (Deferred Newer Business), a commenter notes that the
amounts reported here would not be the exact amount as those of the prior reporting year, due to
the allowed claims run-out of the policies to the current year’s 3/31 reporting timeframe.
Response 21
A change is not required. Guidance on this comment is only required for future MLR reporting
years beyond 2011. Instructions for the 2012 MLR reporting year and beyond will be issued at a
later date.
Comment 22
Several commenters request that Line 2.13 (Contingent Benefit and Lawsuit Reserves) be
removed from Part 2 of the MLR Form. The commenters suggest that publication of litigation
reserves could provide litigants an undue advantage by providing them the amounts an issuer is
setting aside for potential settlements.
Response 22
No policy change is required. Line 2.13 includes reserves for both the policy claims portion of
the lawsuit in addition to reserves of the policy claims for contingent benefits. In addition, Line
2.13 does not include reserves for other expenses related to lawsuits such as legal fees and
damages other than claims. Therefore, we think that it is unlikely that a litigant could ascertain
from Line 2.13 the amount set aside for a potential settlement. The instruction for this item is
being revised to clarify the that issuers should include only the claims-related portion of reserves
for both contingent benefits and lawsuits and that issuers should exclude all reserves related to
other costs associated with lawsuits such as legal fees, court costs, pain and suffering damages,
and punitive damages, etc.
Comment 23
Regarding Part 2, Line 2.9 (Reserve for Experience Rating Refunds), a commenter suggests that
the amounts should be automatically calculated based on data that is entered in other MLR Form
cells.
Response 23
A change to the MLR Form is not required. Auto-populating this information increases the
potential for data validation issues due to different issuer methodologies in calculating this
amount. Therefore, manual entry of this field is required.
Comment 24
Regarding the Instructions for Line 2.10 (Part 2 Reserve for Experience Rating Refunds - Prior
Year), a commenter suggests that CMS clarify that this information is applicable only to “staff
model HMOs.”

8

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 24
The instruction for Line 2.10, Part 2, is being revised to indicate that it is applicable to only staff
model HMOs.
Comment 25
Regarding the Instructions for Line 2.8, Part 2 (Experience Rating Refunds Paid), one
commenter suggests that CMS clarify that this amount should include State refunds.
Response 25
To remain consistent with the MLR regulations, the instruction for Line 2.8, Part 2, is being
revised to indicate that this amount should include State refunds.
Comment 26
A commenter notes that regarding the Federal Employee Health Benefits Program (FEHBP), a
reserve is held each year for prior year settlements related to audits of the premium calculation.
The commenter requests that CMS clarify how an issuer would report revenue related to these
reserves.
Response 26
A change is not required. The Instructions permit MLR calculations to include only the reserves
described in the MLR regulation.
Comment 27
One commenter requests that CMS extend the MLR Annual Report filing deadline for the 2011
reporting year and communicate the method by which issuers are to file the report for the 2011
reporting year by March 1, 2012.
Response 27
A change is not required. The MLR regulations provide that the deadline for the MLR Form to
be filed is June 1 of the year following the MLR reporting year.
Comment 28
Regarding page 3 of the Instructions, two commenters suggest that CMS allow issuers to use
individual State rules to determine how to report the experience related to sole proprietors. The
commenters state that because some States require health plans to cover sole proprietors in their
small group business, it would be administratively burdensome to require the experience for sole
proprietors to be removed from the small group experience for MLR purposes.

9

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 28
A change is not required. PHS Act §2791 defines the “individual market,” the “large group
market,” and the “small group market” and it applies these definitions to the MLR regulations.
To be considered a group health plan, the health plan must have “employees” among its
participants. For the purpose of determining whether a group health plan exists, federal law does
not classify an individual and his or her spouse as employees when the trade or business is
wholly owned by the individual or by the individual and his or her spouse. Thus, where a sole
proprietor and/or a spouse-employee are the only enrolled employees, the health plan would not
be considered to be a group health plan. Its experience would be aggregated with the issuer’s
individual market experience and not with the issuer’s small group market experience. However,
if a sole proprietor enrolls a non-spouse employee, the experience of that plan may be considered
part of the small group market for MLR purposes. Even if the only enrollee is one employee
who is not an owner or spouse, the plan could still be considered part of the small group market
for MLR purposes.
Comment 29
Several issuers suggest that CMS allow ICD-10 conversion costs to be included as an expense
related to activities that improve health care quality. The commenters also request that
Instructions leave latitude for issuers to report ICD-10 expenses for years other than 2012 and
2013.
Response 29
The MLR regulation applicable to an issuer’s 2011 MLR experience does not allow ICD-10
conversion costs to be included as an expense related to activities that improve health care
quality. The MLR Final Rule (FR), published December 7, 2011, provides that for the 2012 and
2013 MLR reporting years, an issuer may include ICD-10 conversion costs as an expense related
to the improvement of health care quality. The Instructions are being revised to clarify that the
Instructions apply only to the reporting of 2011 MLR experience. Instructions for 2012 and
beyond will be issued at a later date.
Comment 30
One commenter requests that CMS clarify that issuers providing only HIPAA-excepted benefits
are not required to report their MLR experience.
Response 30
The Instructions are being revised to indicate that the MLR Form is required of all issuers
offering “health insurance coverage.” All terms used in the Instructions that are not defined have
the meaning used in 45 CFR Part 158 and are further defined within PHS Act §2791. The term
“health insurance coverage” means benefits consisting of medical care (provided directly,
through insurance or reimbursement, or otherwise and including items and services paid for as
medical care) under any hospital or medical service policy or certificate, hospital or medical
service plan contract, or health maintenance organization contract offered by a health insurance
issuer. The definition includes any insurance product, such as drug, chiropractic, or mental

10

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
health coverage, whether sold as a stand-alone product or in conjunction with any other health
insurance coverage, unless specifically identified as “excepted benefits” by §2791 of the PHS
Act.
Comment 31
Several commenters request that CMS revise the MLR Form so that issuers are not required to
separately report “mini-med” experience.
Response 31
A change is not required. For the 2011 MLR reporting year, 45 CFR §158.120(d)(3) requires
issuers of policies that have a total limit of $250,000 or less to report the experience of such
policies separately from that of other policies.
Comment 32
Two commenters note that page 3 of the Instructions states that:
an issuer must report … only the business issued by the reporting entity. Business that is
written by an unaffiliated entity as part of a package provided to the enrollee (e.g.,
inpatient coverage written by the reporting entity, outpatient coverage written by an
unaffiliated separate entity) must not be included in this MLR Form.
The commenters suggests that CMS revise this policy and allow the reporting of the out-ofnetwork portion to be treated as reinsurance assumed that is to be reported by the assuming
carrier only.
Response 32
A change is not required. The Instructions conform to 45 CFR §158.120(c), which provides that
“where a group health plan involves health insurance coverage obtained from two affiliated
issuers, one providing in-network coverage only and another providing out-of-network coverage
only … experience may be treated as if it were all related to the contract provided by the innetwork issuer.” The IFR does not provide that an entity may report the claims expenses of an
unaffiliated entity and does not provide that such expenses may be treated as 100% assumed
reinsurance (which must be reported by the assuming carrier only).
Comment 33
Regarding page 2 of the Instructions for reporting of reinsurance, a commenter requests CMS to
clarify treatment of assumption reinsurance that occurs after 2011.
Response 33
The instructions for reinsurance, page 2, are being revised to state:

11

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Experience under a 100% assumption reinsurance agreement (treated as novation) must
be reported by the assuming issuer for the entire MLR reporting year during which the
policies are assumed and must not be reported by the ceding issuer.
Reporting of 100% indemnity reinsurance and administrative agreements is limited to
only those agreements both entered into and effective prior to March 23, 2010, where the
assuming entity is responsible for 100% of the ceding entity’s financial risk and takes on
all of the administration of the block of business. Experience under those indemnity
reinsurance and administrative agreements must be reported by the assuming issuer and
must not be reported by the ceding issuer.
Comment 34
Regarding page 17 of the Instructions, Part 2 Lines 1.12 and 1.13 (Premiums Ceded and
Assumed Under 100% Reinsurance), a commenter suggests these lines be removed because this
is information related to novated contracts and therefore, the “ceding” company will not have
access to this data.
Response 34
A change is not required. Lines 1.12 and 1.13 require issuers to report the amount of business
ceded (Line 1.12) and assumed (Line 1.13) under a 100% assumptive agreement with novation
and/or under a 100% indemnity reinsurance and administrative agreement, limited to only those
agreements both entered into and effective prior to March 23, 2010, where the assuming entity is
responsible for 100% of the ceding entity’s financial risk and takes on all of the administration of
the block of business. Issuers will have this information as it is required to calculate the value of
Line 1.1 (Direct Premiums).
Comment 35
Regarding the Instructions for Part 3, Improving Health Care Quality Expenses (General
Definition), several commenters note that the Instructions closely follow 45 CFR §158.150 and
organize the allowable and non-allowable Quality Improvement (QI) activities into a list that is
easy to understand and use in completing the MLR Form. However, the commenters suggest
adding specific instructions to the General Definition instructions for reporting and
demonstrating measurable improvements in health care quality.
Response 35
A change is not required. As noted by the commenters, the instructions for this section comport
with 45 CFR §158.150 and organize the allowable and non-allowable Quality Improvement (QI)
activities into a list format that is easy to understand and use in completing the MLR Form.
Comment 36
Regarding page 25 of the Instructions, two commenters note the cost of any activity that is not
approved by the Secretary must be excluded from QI, unless, as indicated in 45 CFR
§158.150(b), the costs relate to an activity that improve health outcomes, prevent hospital

12

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
readmissions, improve patient safety, promote wellness, or are considered HIT expenses. The
commenters suggest that this instruction is inconsistent with CMS guidance issued on May 13,
2011.
Response 36
A change is not required. The Instructions are consistent with CMS guidance issued on May 13,
2011. Referencing 45 CFR §158.150(b)(2), the guidance states:
in order to be reported as a QIA, the activity must be primarily designed to do one
of four things: (i) improve health outcomes including increasing the likelihood of
desired outcomes compared to a baseline and reduce health disparities among
specified populations; (ii) prevent hospital readmission through a comprehensive
program for hospital discharge; (iii) improve patient safety, reduce medical errors,
and lower infection and mortality rates; or (iv) implement, promote, and increase
wellness and health activities. Section 158.150(b)(2) provides a list of examples
following each of these four things. Each list of examples is intended to be
illustrative and not exhaustive.
So long as a QI activity's costs support the definitions and purposes defined under §158.150(b)
or the activity is otherwise approved by the Secretary, it need not be explicitly listed in
§158.150(b)(2).
Comment 37
A commenter suggests that the Instructions do not address how to handle rate credit receivables.
The commenter states that there is no place to report any type of receivable related to rate credits.
As a result, the calculation does not actually arrive at an incurred amount if there are any
amounts receivable.
Response 37
The Instructions are being revised to clarify that rate credit receivables should be reflected in the
reserves for rate credits.
Comment 38
A commenter suggests that CMS revise its policy and not require an issuer with zero premium in
a State, even if it offers health insurance coverage in that State, to complete the MLR Form. The
commenter also asserts that Parts 3 through 6 of the MLR Form and reporting of information
related to lines of business that are not subject to the MLR standard, such as government
programs (Medicare and Medicaid) and self-funded plans, should not be required.
Response 38
A change is not required. The reporting requirements and Parts 3 through 6 of the MLR Form
conform to the MLR regulations. Information related to business lines not subject to the MLR
standard, such as government programs (Medicare and Medicaid) and self-funded plans, is

13

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
required to ensure the reasonableness and validity of the data reported that relates to business
lines that are subject to the MLR standard. In addition, this information conforms to the
information requested by the NAIC on the 2011 SHCE.
Comment 39
Two commenters suggest that CMS delay until September 15, the reporting of: the number of
policyholders and subscribers owed a rebate; the number of policyholders and subscribers whose
rebates would be de minimis; the amount of de minimis rebates; the amount of rebates paid via
premium credit; and the amount of rebates paid via lump sum reimbursement.
Response 39
No change is required. Section 158.260 of the MLR regulation requires that the information
described above must be reported by June 1 of the year following the end of the MLR reporting
year.
Comment 40
Regarding the instruction for Part 2, Lines 1.5 through 1.7 (relating to experience rated refunds),
one commenter suggests that it would not be administratively possible for all issuers to separate
their experience refund reserve and payments by MLR reporting year. The commenter suggests that
CMS allow the use of the “paid plus change in reserve” approach during each calendar year. The
commenter suggests that this approach would allow for reasonable reporting of the impact of
experience refunds, especially because as time passes, the calculation includes experience from
multiple years.
Response 40
No change is required. Consistent NAIC recommendations, the MLR regulation provides for
claims to be reported using the “paid on incurred” approach, allowing only for a change in
contract reserves to be reported.
Comment 41
One commenter requests CMS to clarify if it is CMS’ intention that when elements of the MLR
Form reference values in the SCHE that such values should be equal?
Response 41
The MLR Form contains references to parts of the SHCE to assist issuers with the completion of
the 12/31 columns of the filing. An issuer should rely on the MLR Form Instructions and the
MLR regulation for reporting their 2011 MLR experience.

14

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Comment 42
One commenter suggests that CMS clarify the Instructions to indicate that Part 6, Lines 5, 5a,
and 5b (unclaimed rebates from prior reporting year) are not required for the 2011 MLR
reporting year.
Response 42
Part 6, Lines 5, 5a, and 5b of the Instructions are being revised to indicate that these lines do not
apply to the 2011 MLR reporting year because the data references unclaimed rebates from the
prior MLR reporting year. However, for an issuer’s 2011 MLR experience, there will be no prior
MLR reporting year.
Comment 43
A commenter suggests that the Part 5 Lines 1.6 and 1.5 (“mini-med” numerator) incorrectly
calculate the numerator for mini-med and expatriate plans. The commenter suggests that for
2012 and 2013, rebates paid by these plans should be added to the numerator after the numerator
is multiplied by the mini-med or expatriate adjustment factor.
Response 43
A change is not required. Guidance on this comment is only required for future MLR reporting
years beyond 2011. Instructions for the 2012 MLR reporting year and beyond will be issued at a
later date.
Comment 44
One commenter suggests that the due date for Part 6 of the MLR reporting form should be
delayed until October 1 to enhance accuracy. Section 4 Part 6 requires issuers to report amounts
of rebates paid by premium credit and/or lump sum reimbursement. They state that this
information will not be known until June 1.
Response 45
Most of the information required by Part 6 of the MLR reporting form will be known by June 1.
Some of the information required by Part 6 of the MLR reporting form will not be known until
later, and such information is not required to be reported until the subsequent MLR reporting
year. Thus, those portions that will not be known are grayed out (i.e. no input is permitted) on
the reporting form for 2011 experience, and will be available for input on future years’ forms.

15

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Comments and Responses Regarding MLR Rebate Notices and MLR Information Notice
COMMENTS REGARDING MLR REBATE NOTICES
Comment 1
Three commenters assert that in the final paragraph of the rebate Notices, providing the refund
amount for each subscriber or group policyholder should not be optional for issuers.
Response 1
CMS appreciates the suggestion from commenters but the regulation (§158.250) does not require
that issuers include the refund amount. Therefore, CMS is making no changes based on this
comment.
Comment 2
One consumer group suggests that the Notices should include more specific information that
explains how premiums dollars are being spent, not just whether the MLR was being met.
Response 2
CMS is making no change based on this comment. The regulation (§158.250) does not require
that the Notices include specific information on how premium dollars are being spent.
Comment 3
One health plan requests that CMS not require issuers to report premium dollar amounts.
Response 3
Reporting the total premium dollar amount is a requirement in the MLR regulation under
§158.250, therefore, CMS is not making a change to the Notices based on this comment.
Comment 4
Two commenters assert that Notices should refer to “rebates” rather than “refunds,” as “rebates”
is the term used by the statute and regulation.
Response 4
CMS is revising the language in the Notices and Instructions from “refund” to “rebate” to
correspond with the language in the statute and regulation, as commenters suggest.
Comment 5
Two consumer groups assert that the Notices should be translated into the primary language of
the policyholder.

16

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 5
CMS appreciates the suggestion and will consider this as it determines the form of the Notices
beyond 2011.
Comment 6
One health plan requests that CMS allow plans to specify the State for which the Notice pertains
to reduce the potential for confusion among subscribers.
Response 6
In response to the comment, CMS is clarifying the Instructions to allow issuers the option of
specifying the State in which they reside or to use a generic reference to the subscriber’s State.
Comment 7
One commenter suggests we change all “ACA” references to “the law”.
Response 7
CMS is not making a change pursuant to this request. We think that specifically referring to the
Affordable Care Act will cause less confusion among consumers.
Comment 8
One issuer notes that if CMS requires these Notices to be used, they should include additional
examples of administrative costs that are reflective of consumer-focused administrative
initiatives such as developing provider networks and combating fraud, which constitute a large
component of issuers’ administrative costs.
Response 8
Based on the issuer’s comment, CMS is adding language to the Notices by including the example
“sales” to reflect additional administrative costs.
Comment 9
Several commenters assert that in the Notices “Salaries and advertising” are given as examples
of administrative costs. “Salaries” might lead some consumers to confuse it with doctors’ fees.
They recommend substituting the following: “No more than 20 [15] percent of premiums may be
spent on non-medical costs, such as administration and marketing.”
Response 9
While CMS appreciates the concern of commenters, we are not making any changes based on
this comment due to the fact that some non-medical costs, such as quality improving activities,
are not included in the 20% or 15% cap on an issuer’s administration costs in the MLR formula.

17

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Furthermore, CMS thinks the letter makes clear that amounts spent on medical care are not an
administrative cost.
Comment 10
Several commenters state that the Notices cite wellness programs as an example of a quality
improvement activity. However, they assert that wellness activities are not the best example,
given that some premiums and cost-sharing vary based on enrollees’ compliance with certain
wellness programs. They recommend that the example be dropped altogether to shorten the
sentence and make it more readable. Some commenters suggested that using “efforts to improve
patient safety” would be a better example of a quality improvement activity.
Response 10
Based on these comments, CMS is revising the language in the Notices. Instead of using
wellness programs as an example of a quality improving activity, CMS is using “efforts to
improve patient safety” as an example.
Comment 11
Two consumer groups suggest that we change the sentence regarding higher State MLR
standards to read: “States may require health insurers to meet a higher standard.”
Response 11
CMS is revising the Notices to reflect the change suggested by the commenters. The sentence
that previously stated “The Affordable Care Act allows States to require health insurers to meet a
higher ratio” will now read “States may require health insurers to meet a higher standard”.
Comment 12
Two consumer groups note that the current templates do not address non-credible issuers, which
are “presumed” to meet or exceed the 80% or 85% MLR standard. They recommend providing
Notices that state the issuer’s MLR and that no rebate will be paid because of the plan’s size, or
alternatively, that non-credible issuers need not provide notice.
Response 12
Since non-credible issuers are presumed to meet or exceed the MLR standard, they do not pay
rebates. CMS has clarified the Instructions to reflect that Notices #1 - #3 do not apply to noncredible issuers.
Comment 13
Three consumer groups recommend that “mini-med” issuers should be required to provide
information about the multiplier that is applied to the numerator of mini-med experience. They
also recommend that information regarding MLR be added to Notices regarding the Affordable
Care Act’s annual benefit limit rules.

18

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 13
CMS is not making a change to the Notices based on these comments. We appreciate the
concerns of commenters; however, we think that the burden on issuers would exceed the benefits
received by consumers. We think that consumers will have the information necessary to
understand how their plan achieved their MLR standard.
Comment 14
One issuer association suggests that CMS require general toll-free numbers on the Notices.
Response 14
CMS is not making a change based on this comment. We think that the toll-free numbers we are
asking issuers to provide will assist consumers when contacting the issuer with questions.
Comment 15
One consumer group states that in addition to phone numbers, a website or email address should
be provided.
Response 15
CMS is revising the language of the Notices to add a website or email address of the issuer for
consumers to contact with questions.
Comment 16
Two commenters suggest that a generic salutation, rather than a specific salutation, be required
on the Notices.
Response 16
Based on these comments, CMS is revising the Instructions so that issuers may use a generic
salutation on the Notices.
Comment 17
Several commenters request that the President’s (of the issuer) signature not be the only
signature allowed on the Notices because other officers of a corporation typically sign
informational Notices to subscribers and group policyholders.
Response 17
Based on the comments, CMS will be revising the language to allow any executive who is
authorized to attest to the data submitted through the MLR Annual Reporting Form to sign for
the Notices to allow more flexibility.

19

Responses to Comments Received
Federal Register Notice on Revised CMS-10418

Comment 18
Several commenters opposed the overly prescriptive format of the Notices. They state that the
final rule already specifies the content of the rebate Notices. They recommend that a flexible
approach be adopted for MLR rebate Notices, allowing the information to be issued by health
plans in their own form, format and method of distribution.
Response 18
CMS appreciates the concerns of the commenters but is not making any changes to the Notices
themselves based on the comments. The regulation provides that the notice shall be on a form
provided by the Secretary. CMS thinks there is significant benefit to consumers in receiving
consistent notices, and the burden on issuers in providing these notices is the same whether they
are required to use the form notice or send one they have drafted. With respect to the method of
distribution, the Instructions do allow flexibility for issuers to provide the notices electronically
or by mail.
Comment 19
Several commenters assert that the Notices are written above an 8th grade reading level and
should be revised to be more readable.
Response 19
While we appreciate the concerns of commenters, CMS is not revising the Notices that must be
provided in 2012 based on this comment. Medical loss ratio is a complex concept and we have
tried to simplify it as much as possible while still making sure that the notices incorporate the
regulatory requirements of 45 CFR §158.250. CMS will revisit the readability level for future
years’ notices.
Comment 20
One health plan asks that we permit State Departments of Insurance to develop alternative
language for States whose MLR standards exceed the federal MLR requirement.
Response 20
States that have a higher MLR standard are welcome to develop notices for issuers to provide in
compliance with their State law. However, all issuers who owe rebates must provide the notice
required by 45 CFR Part 158, with the specific information required in the MLR regulation.
Therefore, CMS is making no change based on this comment.
Comment 21
One health plan requests clarification that Notices may be sent prior to or after payment of
rebates so long as notice is provided by Aug 1.

20

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 21
CMS is clarifying the Instructions to note that Notices may be sent prior to or after payment of
rebates as long as the notice is provided by August 1, as stated in the regulation (§158.250).
Comment 22
Three consumer groups ask that CMS place key information regarding the Notices in a standalone box at the top of the Notices.
Response 22
CMS is making no change based on this comment. We think the information provided in the
title and throughout the Notices is sufficient for consumers to gain a clear understanding of the
purpose of the MLR rebate.
Comment 23
Three consumer groups recommend that the Notices should note the MLR standard that will be
enforced in the State in 2012 and 2013 and that the minimum 80 percent standard will apply in
2014. They recommend providing a second URL to link consumers to information specific to
adjustments being used in their State.
Response 23
The Notices are only applicable for one year, thus CMS is not making a change based on this
comment.
Comment 24
Three commenters suggest that the URLs should be shortened to make them more readable.
They suggest: www.healthcare.gov/MLR and using an HTML “redirect” to link consumers to the
final landing page.
Response 24
Due to timing issues in creating an HTML redirect to link consumers to the final landing page,
CMS is making no change based on this comment.
Comment 25
One consumer group asks for clarification of the definition of “group policyholder” in Notice 2.
Response 25
CMS is making no changes based on this comment. We think “policyholder” is clearly defined
in §158.103 of the MLR regulation and the meaning of group policyholder is clear.

21

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Comment 26
One commenter states that in Notice 2, the last paragraph on page one lists two ways in which a
non-Federal governmental plan may distribute the subscriber portion of any rebate to
subscribers. The second bullet does not identify the additional other potential recipients
identified in subsection (i) of 158.242(b)(1). The commenter suggests that the notice should be
amended to embrace all categories of individuals identified in section 158.242(b)(1).
Response 26
CMS is making no change based on this comment. This language comports with §158.242 and
we think adequately references all recipients who will be receiving rebates.
Comment 27
One commenter states that page 2 of the MLR Rebate Notice Instructions notes that issuers may
run an eligibility report of subscribers to identify who must be provided rebate Notices. This
language appears to apply only to group policyholders and subscribers who will receive Notice
2, but that is not clear in the Instructions. This language should be revised to clarify this issue.
Response 27
Based on the comment received, CMS is updating the Instructions to clarify that an eligibility
report may be used for all Notices.
Comment 28
Two commenters note that Notice 2 is applicable to both group policyholders and subscribers in
group plans that will receive a rebate. However, the 1st sentence is written for only the group
policyholder. They recommend that it be made clear that the rebate is being paid only to the
group policyholder – otherwise subscribers receiving the notice would be looking for a rebate
from health plans.
Response 28
CMS is revising the Notice 2 to clarify that the rebate is being sent to the employer or group
policyholder, based on the comments received.
Comment 29
One commenter suggests that Notice 2 to group policyholders does not address the common
situation where an employer group may have two different types of plan offerings and it receives
a rebate for one but not the other. For example, the commenter states that if an employer
receives a rebate on its HMO offering but not its PPO offering, Notice # 2 will not inform an
employer of that fact.

22

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
Response 29
No change is required. According to the MLR regulation, each issuer will notify each subscriber
or group policy holder of their MLR rebate status. In the instance where an employer offers two
different plans from two different issuers who file separate MLR reports, each issuer will be
required to separately notify the subscribers or group policy holder if it owes rebates.
Comment 30
One commenter requests that CMS clarify that premium rebates provided in the form of
premium credits should be applied to the next premium payment due on or after August 1
following the MLR reporting year. While many health plans have a monthly billing cycle for
premium payments, some provide for quarterly or even annual premium payments. Requiring
that rebates be applied no later than the next premium payment due on or after the August 1 date
will provide flexibility for the full range of premium billing approaches. The commenter notes
that the first sample notice states that all rebates must be paid by August 1.
Response 30
The MLR regulation, at 45 CFR §158.241, requires that any rebate that is provided in the form of
a premium credit must be provided by applying the full amount due to the first month’s premium
that is due on or after August 1 following the MLR Reporting year. The regulation also provides
that any overage premium credit must be applied to succeeding premium payments until the full
amount of the rebate has been credited. CMS is revising the notices to address rebates that are
paid by premium credit.
Comment 31
One commenter notes that in Notice 2, the first sentence of the second paragraph describing the
“Ways in Which an Employer Can Distribute the Refund,” the reference to ERISA as the
Employee Retirement Income Security Income Act of 1974 is incorrect – the second “Income”
should be removed.
Response 31
Based on this comment, CMS is revising the sentence in the notice to correctly reference ERISA
as “Employee Retirement Income Security Act of 1974”.
Comment 32
One commenter states that the sample Notices 2 and 3 should allow for a distinction to be made
for whether the MLR rebate notice is for a small group or a large group, since there is a material
difference in the MLR threshold of 80 percent for small group and 85 percent for large group.
Response 32
CMS is not making a change based on this comment. Each of the notices is a template for
issuers to use, and provides the choices of 80 percent for the small group market or 85 percent

23

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
for the large group market. The instructions make clear that the issuer is to insert the appropriate
standard for the relevant market.
Comment 33
One commenter states that they oppose the two-step process of requiring health plans to issue
rebates to the group policyholder, and Notices to subscribers of the group (the scenario in
Sample Notice 2). They recommend that the group policyholder be permitted to issue the Notice
of rebate to employees.
Response 33
CMS is not making a change based on this comment. The MLR requirements generally apply to
issuers and not to policyholders, thus it is issuers that must provide the notices. In addition, we
make clear in the Instructions that the rebate may be issued with the Notice that is provided to
the group policyholder, if the issuer chooses to do so, thus avoiding a two-step process.
Comment 34
One health plan asserts that if issuers are required to mail out Notices to non-recipients of
rebates, then the model Notices should include language to address subscribers not receiving
rebates due to the de minimis regulation.
Response 34
The regulation requires that notices be sent to each enrollee who receives a rebate. If a rebate is
de minimis, the enrollee would not be receiving a rebate and therefore would not be receiving a
notice.
COMMENTS REGARDING MLR INFORMATION NOTICE
Comment 35
Regarding the instance where an issuer meets the MLR standard, several commenters note that
the final paragraph of the MLR Information Notice indicates that consumers are “receiving the
required value for [their] health care dollars.” The commenters suggest that an issuer’s MLR is
one of many metrics that are used to measure value and that meeting the MLR standard does not
necessarily mean consumers are “receiving the required value.” For instance, if a plan also
requested or implemented a rate increase that was determined to be unreasonable, the commenter
suggests that the statement that the plan meets the “required value” may be untrue.
Response 35
No change is required. The MLR Information Notice is only intended to inform consumers
about their issuer’s MLR experience. As referenced in section 2718(b) of the Public Health
Services Act, the MLR standard helps “ensure that consumers receive value for their premium
payments.” Furthermore, if a rate increase was prospectively determined to be unreasonable,

24

Responses to Comments Received
Federal Register Notice on Revised CMS-10418
that same issuer could still meet the applicable MLR standard, which is a retrospective
calculation and the statement about receiving the required value would still be accurate.
Comment 36
One commenter asserts that there are other alternatives to issuing further regulation requiring
Notices to customers not receiving rebates. One is for CMS to post on its CCIIO website, and/or
on the Web Portal, a notice similar to Notice # 4.
Response 36
Currently, the MLR Information Notice is a sample and we are not requiring issuers to send them
out. CMS will address this concern if we issue a rule requiring Notice of MLR Information.
Comment 37
One commenter suggests that CMS allow an issuer to classify the cost of providing a notice that
the issuer has met the MLR standard as either an incurred claim or a Federal tax.
Response 37
The MLR Regulation, 45 CFR Part 158, describes which expenses are to be considered incurred
claims or Federal taxes. The regulation does not allow for the cost of providing notices to be
considered an incurred claim or a Federal tax. In addition, this specific notice is currently a
sample notice only, and as such, is not currently required to be sent to policyholders and/or
subscribers.

25