Comment and Response Document

Responses to Comments Received on the Revised CMS-10418
Federal Register 60-Day Notice (80 FR 5118)
Table of Contents
A.

Introduction ...................................................................................................................... 1

B.

Comments on the 2014 MLR Reporting Form, Rebate Notices, and Instructions .......... 1

C.

Comments on the Risk Corridors Plan-level Data Form and Instructions ....................... 5

A. Introduction
CMS received 3 public comments on a number of specific issues regarding the notice of the
revised Medical Loss Ratio (MLR) PRA package published in the Federal Register on January
30, 2015 (80 FR 05118). The 60-day comment period closed on March 31, 2015.
The PRA package contains two collections of information: the MLR Reporting Form (including
the Risk Corridors component) that issuers must file with CMS each year by July 31 and the
accompanying Form Instructions, and the Rebate Notices that issuers must send to subscribers
and policyholders each year no later than September 30. The PRA package modifies the 2013
MLR Annual Reporting Form and Rebate Notices, both of which were previously approved by
OMB under OMB Control Number 0938-1164.
Most of the comments addressed clarification of the instructions, correction of errors and
inconsistencies, treatment of cost-sharing reduction payments, treatment of prior year MLR
rebates, treatment of business ownership changes under risk corridors, and definitions of billable
premium and premium earned. The summary below sets forth each comment and our response.
B. Comments on the 2014 MLR Reporting Form, Rebate Notices, and Instructions
1. Three comments noted several typographical and formula errors on the MLR and Risk
Corridors forms and instructions.
CMS Response
CMS corrected the errors as requested.
2. Three comments suggested that the risk corridors columns of the MLR Form (columns 2A
and 7A) should exclude both non-grandfathered, non-ACA compliant plans and
grandfathered plans.
CMS Response
Grandfathered plans were previously excluded from columns 2A and 7A. CMS revised the
instructions as requested to clarify that plans that are not grandfathered and that are not
ACA compliant are also excluded from columns 2A and 7A. CMS also added a definition
of non-ACA compliant to the 2014 MLR Reporting Instructions to clarify the types of plans
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that are excluded from reporting in columns 2A and 7A.
3. One comment requested that the instructions clarify that issuers who did not offer QHPs in
2014 do not need to complete the risk corridors columns on the MLR Form or the Risk
Corridors Plan Level Data Form.
CMS Response
CMS revised the instructions as requested.
4. One comment requested that the instructions clarify that issuers may use the NAIC’s
statutory accounting principles when reporting Federal reinsurance, risk adjustment, and risk
corridors amounts in the 12/31 columns of the MLR Form; and that issuers may report in the
3/31 columns amounts paid or received under these programs after 3/31.
CMS Response
CMS made no change based on the comment regarding the 12/31 columns. The instructions
for the 12/31 columns already state that the amounts in these columns should equal the
amounts reported on the NAIC’s Supplemental Health Care Exhibit (SHCE). However,
CMS revised the instructions to highlight this fact, and also revised the instructions for the
3/31 columns to enable the line instructions for Part 2 Lines 1.9-1.11 to control.
5. One comment requested that the instructions permit the use of accruals for expected
adjustments as a result of appeals of Federal reinsurance and risk adjustment payment or
charge amounts.
CMS Response
CMS made no change based on this comment. Such adjustments will be reflected in MLR
calculations for subsequent years.
6. Three comments requested that the MLR Form and Instructions be revised to permit use of
estimated cost-sharing reduction payments. One comment additionally requested that the
cost-sharing reduction differential amounts be embedded in the various incurred claims
component lines.
CMS Response
CMS made no change based on this comment. CMS will provide guidance with respect to
treatment of cost-sharing reduction payments at a later date.
7. One comment requested that the instructions clarify that issuers may report the entire
amount of Federal reinsurance contributions on MLR Form Part 1 Line 3.3a.
CMS Response
CMS revised the instructions as requested.
8. One comment requested that the instructions clarify that issuers may report Exchange user
fees and risk adjustment user fees on MLR Form Part 1 Line 3.3b.

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CMS Response
With respect to Exchange user fees, CMS revised the instructions as requested, to reflect the
April 20, 2012 technical guidance. However, as CMS previously stated in regulations and
sub-regulatory guidance, risk adjustment user fees may not be reported as Federal and State
regulatory authority licenses and fees deductible from premium for MLR purposes.
9. One comment requested that CMS provide information regarding the format of the Federal
reinsurance and risk adjustment amounts notifications.
CMS Response
CMS anticipates the notifications to be available in CSV format and to include Issuer ID,
Issuer Legal Name, State, and Payment or Charge amount.
10. One comment requested that the MLR Form not collect information on the advance
payments of the premium tax credit (APTC).
CMS Response
CMS made no change based on this comment. This information is needed to facilitate
validation of APTC reporting and, similarly to certain other lines, to alert issuers to the fact
that the APTC amounts must be included in earned premium.
11. Two comments requested that the MLR Form and Instructions be revised to account for
prior year rebates in the MLR numerator.
CMS Response
CMS made no change based on this comment. The MLR regulation at 45 CFR §158.221
unambiguously does not permit inclusion of prior year rebates past the 2013 reporting year.
12. One comment recommended simplifying the accounting for the Federal reinsurance
payments in calculations.
CMS Response
CMS made no change based on this comment. While CMS shares the commenter’s
preference for simplified calculations, the specific calculation methodology in question is
necessary for compliance with the statute and the regulations.
13. One comment requested removal of references to SHCE lines from the MLR Form where
the lines do not directly correspond.
CMS Response
CMS removed the references as requested.
14. One comment requested that Rebate Notices be revised to include an explanation that the
rebate is calculated as a percentage of premium after certain adjustments.
CMS Response
CMS made no change based on this comment. CMS recognizes that the current language
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has created confusion for some policyholders, and has previously considered revising it.
However, the Notices refer to percentage of premium multiple times, rather than in only the
one sentence quoted by the commenter. The Notices also require inclusion of the actual
aggregate premium amount in addition to specifying the percentage that must be rebated.
Consequently, revising the Notices to refer to adjusted premium in one sentence but
preserving all the remaining references to unadjusted premium, as the comment suggests, is
likely to be equally confusing. Revising the Notices to accurately describe the technical
adjustment in every reference would significantly reduce readability. And revising the
Notices to include a simple qualifier such as “after-tax” premium would, again, be
confusing to the policyholders, who are likely to assume that the reference is to the
policyholders’ taxes, rather than to an allocated portion of the insurer’s taxes.
15. One comment requested clarification that risk corridor allocations be made in accordance
with §153.520, such that allowable administrative costs are allocated across its business pro
rata by premiums earned.
CMS Response
CMS confirms that, as set forth at 45 CFR 153.520, allowable administrative costs must
reflect an amount equal to the pro rata portion of the aggregate amount of such expense
across all of the QHP issuer’s non-grandfathered health plans in a market within a State,
allocated to the QHP based on premiums earned.
16. One commenter requested confirmation that “Administrative Costs Excluding Taxes” in
Part 3, Line 3.2 of the MLR Form should include “Other Taxes” (Part 1, Line 5.5).
CMS Response
CMS has revised the instructions for Line 3.2 as requested so that it excludes the sum of
Part 1 Lines 5.5a and 5.5b.
17. Two commenters recommended that Line 3.5a, “Earned Profit” in Part 3 of the MLR Form
should be adjusted for CSRs, reinsurance payments, and risk adjustment net payments,
Lines 1.4, 1.5, and 1.6, respectively.
CMS Response
CMS revised the formula description for earned profit as requested so that earned premiums
are reduced by allowable costs, which include adjustments for reinsurance, risk adjustment,
and CSR payments.
18. Two commenters recommended that Part 3, Line 3.6a of the 2014 MLR Form should be
profit and administrative costs including taxes rather than excluding taxes.
CMS Response
CMS did not make the requested change. As defined in the 2014 Payment Notice and the
regulations at 45 CFR 153.500, allowable administrative costs in the risk corridors formula
are equal to the lesser of: 1) profit and administrative costs excluding taxes and 2) capped
administrative costs (which include taxes).

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C. Comments on the Risk Corridors Plan-level Data Form and Instructions
1. Three comments requested that the Risk Corridors Plan-level Data Form (Risk Corridors
Form) and Risk Corridors Plan-level Data Form Instructions (Risk Corridors Form
Instructions) use the term “earned premium” instead of “billable premium”, to ensure that
premiums reported match the period for which coverage was provided.
CMS Response
CMS changed all instances of “billable premium” in the Risk Corridors Form and Risk
Corridors Form Instructions to “premium earned” as requested. The term “premium
earned” has the meaning defined at 45 CFR 153.500.
2. Two comments requested that CMS clarify the treatment of changes of ownership and
assumption reinsurance in the Risk Corridors Form Instructions, so that it is consistent with
the MLR instructions.
CMS Response
CMS revised the instructions as requested to clarify that the treatment of changes of
ownership is the same for the risk corridors program and the MLR program.
3. One comment noted an inconsistency in the calculation descriptions for Tab 3, Line 1 in
Appendix A of the Risk Corridors Form Instructions and the Risk Corridors Form.
CMS Response
CMS revised the calculation description in Appendix A of the Risk Corridors Form
Instructions to match the calculation of “Total Percentage of Market Premium in QHPs” in
Tab 3, Line 1 of the Risk Corridors Form.
4. One commenter noted that, although Table 4 was detailed in the Risk Corridors Instructions,
Table 4 (columns K-N) was not shown in the form provided, for substantially similar plans.
CMS Response
CMS did not make any change based on this comment. Table 4 (columns K-N) was
included in the form that was published for 60-day public comment and posted on the CMS
and CCIIO website.

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