Public Comments - AHIP

December 19, 2013
Comments Submitted Electronically at: http://www.regulations.gov
Center for Medicare and Medicaid Services
Office of Strategic Operations and Regulatory Affairs,
Division of Regulations Development,
Room C4–26–05,
7500 Security Boulevard, Baltimore,
Maryland 21244–1850.
Attention: Document Identifier/OMB Control Number CMS-10418
Re:

Annual MLR and Rebate Calculation Report and MLR Rebate Notices
Form Number: CMS–10418
AHIP Comments on the Draft 2013 Instructions and Forms

Dear Ms. McCune,
America’s Health Insurance Plans (AHIP) appreciates the opportunity to provide comments on
the materials in the PRA Information Collection Request published in the Federal Register
November 22, 2013. AHIP is the national trade association representing the health insurance
industry, with members providing health and supplemental benefits to more than 200 million
Americans through employer-sponsored coverage, the group and individual insurance markets,
and public programs such as Medicare and Medicaid.
Based on discussion with our member plan experts, we have the following detailed comments
and recommendations:
1) Part 2 – Section 1 Premiums – Line 1.1 – 3/31 Column - We recommend the instruction for
all 3/31 columns for this line be the same as it was for 2012. The 2012 instruction permitted
companies to report premium collected through 3/31 of the year following the MLR
reporting year for coverage in the MLR reporting year, or simply report amounts on the same
basis as in the 12/31 columns. This second option appears to have been eliminated for 2013
MLR calculations. This will require administrative system changes for some companies.
Given the fact that health insurance premium does not restate significantly subsequent to the
reporting year, requiring these changes would not produce much change in the MLR values.
Requiring companies to incur administrative costs to change their reporting process, which
produces an insignificant change in MLR values that would only be of value for one year,

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seems an unnecessary burden. We recommend the continuation of 2012 Instructions
approach - permitting each company the option of utilizing the approach they utilized with
their 2012 reports.
Substantial changes to systems and reporting will be required for 2014 MLR calculations to
reflect the reinsurance, risk corridor and risk adjustment impact; and these changes will
require changes to issuers' administrative systems to allow for premium adjustments incurred
during the entire first half of 2015. We therefore urge that changes that create additional
administrative changes and costs for such de minimis value for such a limited period be
eliminated.
2) Part 2 – Section 1 Premiums – Line 1.3 – 3/31 Column - The instruction says that with
respect to the unearned premium reserve for 12/31/2013 after adjusting for 3/31 information,
companies are to “report zero.” This is incorrect, as the adjustment from 12/31 to 3/31 is not
to “earn” additional premium, but to reflect changes in enrollment or to adjust for premiums
reported as due as of 12/31 that were ultimately not paid. While we did not catch this error in
the 2012 MLR instructions, we note that companies would have reported the actual correct
amounts if “zero” was not the correct amount. We recommend the change from "report
zero" to "report the adjusted amount, and if there was no adjustment, report the value
from 12/31/2013."
3) ACA Fees Collected in 2013 - We note the request for comment about these fees and the
proposed new sentence with respect to not reporting ACA fees collected as unearned
premium reserves in Part 2, Line 1.3.
It is critical that the 2013 MLR calculations allow for the reduction to the denominator for
the amounts of fees collected with premiums that are earned in 2013 (on fiscal year group
policies). Otherwise, the MLR requirement would require the rebate of these amounts for
2013 while not eliminating the requirement to pay them again in 2014 as the ACA fee.
We continue to recommend that these amounts be permitted to be reported as unearned
premium reserves held as of 12/31, as the most logical and consistent approach for treating
amounts collected for a future commitment. If, from a policy basis, you cannot agree to the
unearned premium reserve method of reporting these amounts, we offer two alternatives for
use in the 2013 MLR calculation, and recommend that this approach be used in subsequent
MLR reporting years as well:
I.

It would be appropriate to reflect the collected ACA fees as an adjustment to the
experience rating refunds Part 2 – Section 1 Premiums – Line 1.5. The NAIC

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recognizes that the requirements with respect to rebates makes these contracts
retrospectively rated contracts; or
II.

It would be possible to include the collected ACA fees as an amount in Part 1 –
Section 1 Premiums – Line 1.5 as “amounts excluded from premium for MLR
calculation purposes that are normally included in premiums for financial
statement purposes” in the 3/31 columns. This would be a unique entry as these
cells are currently marked as “gray.” This would also require a modification to
the instruction for Part 4 – Section 2 MLR Denominator – Line 2.1 – CY Column
to include this as a reduction to the sum of Part 1 Lines 1.1 + 1.2 + 1.3 Columns
3/31.

4) Part 2 – Section 2 Claims - Line 2.6b - 3/31 Column - We are concerned with a lack of
clarity in this section that can be remedied with the inclusion of the phrase "shall exclude the
amount of contract reserves accrued prior to 2011" in the second sentence. In response to
comments on the CY2012 reporting materials, CMS replied to this concern stating that
"Policies issued prior to 2011 are not subject to the MLR provisions."
We appreciated that response, and ask that the instructions be more specific on the
applicability of MLR to those plans issued prior to 2011, which may include grandfathered
plans. The revision below would make it clear that line 2.6b – 3/31 column is intended to
recognize any increase or release of contract reserves on a year-to-year basis following the
effective date of the MLR provision.
We recommend it should read:
2.6b - 3/31 Column – For policies issued prior to 2011, contract reserves may only be used in
the MLR calculation if such reserves were held prior to 2011, and may include reserves used
for the purpose of leveling policy duration-based variation in claims experience only if
durational contract reserves were held for such policies prior to 2011. Reported contract
reserves shall exclude the amount of contract reserves held on December 31, 2010 (as
reported in the 2011 MLR report for line 2.7) and may not exceed contract reserves
calculated using the applicable product pricing assumptions. Calculate as of 12/31 of the
MLR reporting year.
5) Part 4 – Opening Instructions – We believe that there should be more specific instructions on
the reporting of Student Health plans for 2013, especially given the limitations to the
credibility adjustment based on 2011 and 2012.
We recommend that the 2011 and 2012 reported values for Sections 1 and 2 be the results
reported on the Grand Total (GT) spreadsheet for those years. This would include in Line

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1.4 rebates paid for either of these years. Assuming a company paid some actual amounts in
either of those years, that company would be allowed full credibility adjustment for 2013.
We also recommend that companies be given the options to either recalculate the average
deductible for 2011 and 2012 from the entire Student Health plan exposure or use the
average deductible already calculated for each state and use earned premiums to
determine the weighted average of these reported values.
6) Part 4 – Section 1 – Line 1.3 – PY2 and PY1 Columns– We believe that the instructions
should allow for allocation of additional Improving Health Care Quality Expenses to these
accounting periods since there is recognition that claims may be reported and paid beyond
3/31 following the calendar year represented by these columns.
7) Part 4 – Section 1 – Line 1.6 – Instructions – Similar to the above recommendation, the
adjustment factors for Mini-Med were changed from 2011 through 2013.
We recommend that the first paragraph of the instructions should include the adjustment
factors for all three years (2.00 for 2011, 1.75 for 2012 and 1.50 for 2013) so it is clear
these three factors are to be used in completing this line. This is important for the
determination of the appropriate base credibility factor in line 3.2.
We recommend that the instructions then clarify that the adjustment factor to be used in
the Total column is the 2013 factor times the sum of the values in lines 1.2 + 1.3 + 1.4
from the Total column.
8) Aggregating Multiple Years of MLR Experience Subject to Different MLR Standards – On
April 5, 2013, HHS issued CCIIO Technical Guidance (CCIIO 2013-0001) Q&A #58
permitting issuers in state markets with MLR standards that change over time to scale the
prior year experience included in the current MLR numerator, to account for the higher MLR
standard of the current reporting year.
Q&A #58 defined the scaling adjustment as: “the reporting year standard minus the
applicable prior year standard, multiplied by the applicable prior year adjusted premium.
The amount is then added to the experience from the applicable prior year that is included in
the current MLR numerator.”
The numerator section of Part 4 of the 2012 MLR rebate form was not revised to allow
issuers to properly report this numerator scaling adjustment. Following CCIIO verbal
guidance, issuers were advised to “plug” this numerator scaling adjustment into the Part 4,
Line 1.5 total column only. This resulted in HIOS validation warnings and confusion since

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the sum of the current year and prior year columns did not equal the total column for this
line.
The 2013 MLR draft instructions do not include guidance related to aggregating multiple
years of MLR experience subject to different MLR standards. In addition, the 2013 MLR
rebate form Part 4 has not been revised to accommodate the proper reporting of the
numerator scaling adjustment.
We recommend adding clear instruction for 2013 related to the numerator scaling
adjustment allowed when aggregating multiple years of MLR experience subject to
different MLR standards. We recommend the instructions include an actual example,
similar to the Q&A #58 example provided in the April 5, 2013 technical guidance, but
reflecting the calculation using three years’ of experience.
Example (using Iowa’s MLR standards):
2011 MLR Standard: 67%
2012 MLR Standard: 75%
2013 MLR Standard: 80%
2011 MLR Standard Change: 80% - 67% = 13%
2012 MLR Standard Change: 80% - 75% = 5%
2011 Premiums: 1,000,000
2012 Premiums: 1,000,000
2011 MLR Standard adjustment: 13% X $1,000,000 = $130,000
2012 MLR Standard adjustment: 5% X $1,000,000 = $50,000
Total amount added to 2013 numerator is $180,000 (numerator scaling adjustment)
In addition, we recommend the 2013 MLR reporting form be revised to include a line in the
numerator section of Part 4 to allow issuers to properly reflect the scaling adjustment on
the form. Adding clear instruction and revising the form to reflect CCIIO issued guidance,
would result in the elimination of unnecessary validation warnings and would eliminate the
potential for inaccurate or inconsistent reporting across the industry.
9) Validation Warning Formulas – In the prior year, validation warnings were not
communicated to issuers until after the MLR rebate form was uploaded to HIOS. This
resulted in preparer and attester confusion, avoidable re-work and risky last-minute
adjustments to the reported data.

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We recommend HHS include the validation expectations in the instructions or provide the
validation expectations in a separate communication well in advance of the MLR rebate
form filing deadline. Providing the validation expectations in the instructions would allow
issuers to pro-actively verify the accuracy of the programmed data prior to filing and would
promote clear understanding of how reported amounts are expected to cross-reference with
other data within and outside of the MLR reporting form. We believe providing this
transparency would mutually benefit both issuers and HHS.
10) Part 1 – Section 5 – 3/31 Columns – Due to the fact that non-claims costs have no impact on
the MLR calculations and the fact that SG&A expenses generally are not attributable to a
particular claims incurral date, we recommend the 3/31 column for this section be grayed
out and the data in Part 1 Section 5 be required to be reported for the 12/31 columns only.
11) Closed Blocks of Business – We appreciate HHS’ efforts to reduce the reporting burden for
companies with only grand-fathered plans in closed blocks of business. However, the
instructions do not provide guidance for companies that have no active policies or
membership in the MLR reporting year, but have only reported premium adjustments and
claims run-out related to policies that were active in previous years.
We recommend HHS make it clear in the instructions that companies in this situation are
exempt from filing the MLR rebate form and also exempt from following the closed
blocks of business reporting requirements.
12) Additional Clarification needed on Page 2 - Introductory Section. - Finally, we recommend
additional language be added to the introduction of the reporting instructions to provide
guidance consistent with the May 30, 2013 sub-regulatory guidance issued by CCIIO on the
treatment of hospital indemnity and fixed indemnity products for purposes of reporting the
medical loss ratio experience for 2012. The “purpose of this FAQ is to provide guidance on
the effective date of Affordable Care Act Implementation FAQs, Set 11, Question and
Answer #7, issued in February 2013 by the Departments of Health and Human Services
(HHS), Labor and Treasury (collectively, the Departments) related to the Medical Loss
Ratio reporting and rebate requirements set forth at 45 CFR Part 158.” The text of the MLR
FAQ follows:
Question #61: Must an issuer of plans that the issuer had categorized as “fixed indemnity”
policies, but which in fact fail to satisfy the criteria for fixed indemnity policies described in
the Affordable Care Act Implementation FAQs, Set 11, Question and Answer #7 (January
24, 2013), report the medical loss ratio (MLR) experience of those plans to the Secretary for
the 2012 reporting year?

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Answer #61: No. Issuers do not need to report the experience of these policies for the 2012
MLR reporting year.
We thus recommend this clarification be included introductory language on page 1 of the
2013 Instructions, at the end of the paragraph that begins "The term "health insurance
coverage": "Fixed Indemnity policies, as HIPAA "excepted benefits" also need not be
reported for the 2013 MLR Reporting year, per CMS CCIIO MLR FAQ of May 2013."
(http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/mlrguidance-5-30-2013.pdf)
We strongly urge that these comments be considered, and the recommendations incorporated in
the instructions for the 2013 MLR Reporting and Rebate Calculation, as they provide further
clarification on areas to assure more consistency in the reporting of health insurance issuers
offering group or individual health insurance coverage who are required to report information
pursuant to Section 2718 of the Affordable Care Act and implementing regulation at 45 CFR
Part 158.
We also note that we were unable to provide robust comments on the spreadsheet provided, as it
did not include the formulas/macros, (as was provided for the 2012 reporting). We hope that will
be made available, and will be happy to review it for consistency with the MLR and Rebate
Report Draft Instructions
We would be happy to discuss any of these comments with you, or provide further information
as needed.
Thank you.
Sincerely,

Colleen M. (Candy) Gallaher
Senior Vice President - State Policy
cc: William Weller, OmegaSquared - Consultant to AHIP