Cms-10418 - Mlr 2016 Ssa

Supporting Statement
Medical Loss Ratio Annual Reports, MLR Notices, and Recordkeeping Requirements
(CMS-10418 - OMB Control Number - 0938 -1164)
A.

Justification
1. Circumstances Making the Collection of Information Necessary
Section 2718 of the Public Health Services Act (PHS Act) requires a health insurance issuer (issuer)
offering group or individual health insurance coverage to submit a report to the Secretary of HHS
concerning the amount the issuer spends each year on claims, quality improvement expenses, nonclaims costs, Federal and State taxes, licensing and regulatory fees, earned premium, and beginning
with the 2014 reporting year, the amounts related to the transitional reinsurance, risk corridors, and
risk adjustment programs established under sections 1341, 1342 and 1343 respectively of the
Affordable Care Act. An issuer must provide a rebate to policyholders if the amount it spends in a
reporting year on certain costs compared to its premium revenue (excluding Federal and States taxes
and licensing and regulatory fees) is below a certain ratio, referred to as the medical loss ratio
(MLR). Specifically, section 2718(b) requires an issuer to provide a rebate to each of its
policyholders if the MLR for the respective reporting year is less than 85 percent in the large group
market or less than 80 percent in the small group or individual market. The implementing
regulations for this provision are located in Part 158 to Title 45 of the Code of Federal Regulations.
Under Section 1342 of the Patient Protection and Affordable Care Act, issuers of qualified health
plans (QHPs) must participate in the risk corridors program and pay charges to or receive payments
from HHS based on the ratio of the issuer’s allowable costs to the target amount. The implementing
regulation for this provision is located in 45 CFR Part 153. For benefit years 2014 through 2016, a
QHP issuer is required to annually submit data to HHS that includes information on the issuer’s
allowable costs, allowable administrative costs, taxes and premiums.
The following information collections are included in this request:
Annual Report. Under 45 CFR §§158.110 and 153.530, issuers are required to submit an annual
data report to the Secretary by July 31 of the year following the end of an MLR reporting / risk
corridors benefit year. The annual report must be submitted to the Secretary by July 31, 2017 for the
2016 reporting year. Sections 158.120 through 158.260 and 153.530 set out the data requirements
for this report. In addition, under 45 CFR §158.260, each issuer must also submit a report to the
Secretary concerning the rebates provided to and on behalf of enrollees. Section 158.260 requires
that this report be submitted with the annual report under §158.110. The annual reporting form for
the 2015 reporting year was approved by OMB Control Number 0938-1164. This information
collection updates the annual reporting form for changes in the requirements regarding the reporting
of the MLR and risk corridors data that apply to the 2016 reporting year.
QHP issuers are also required to submit a Risk Corridors Plan-Level Data Form for each year of the
temporary risk corridors program. The Risk Corridors Plan-Level Data Form will be used to
calculate risk corridors payment and charge amounts. Each company with at least one health
insurance issuer that offered a certified QHP through the Federal or State-based Marketplace during
the 2016 benefit year will submit The Risk Corridors Plan-Level Data Form with plan-specific

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premium data for each of its QHP issuers in the individual or small group markets. This data
submission is authorized by 45 CFR Part 153.
Notices. As specified in 45 CFR §158.240(a), an issuer must provide rebates to enrollees and
policyholders on behalf of enrollees when the issuer’s MLR does not meet the applicable minimum
MLR standard. Section 158.250 requires an issuer to provide information in the form of a rebate
notice to policyholders who are owed a rebate and subscribers whose policyholders are owed a
rebate. As also provided in 45 CFR §158.250, CMS has developed a standard form for the rebate
notice that each issuer must send by September 30 of the year following the reporting year for which
policyholders are entitled to a rebate. The standard rebate notice for the 2016 MLR reporting year
must be sent by September 30, 2017. The rebate notices were already approved by OMB Control
Number 0938-1164 and are not being revised at this time. The burden estimate has been updated
based upon the annual reports that were received for the 2015 reporting year.
Recordkeeping. The MLR regulations contain two recordkeeping requirements. Section 158.502
requires an issuer to maintain all documents and other evidence necessary to enable CMS to verify
that the data submitted by the issuer is in compliance with 45 CFR Part 158, including all
documents, records, and other evidence used to calculate the MLR and any rebates, and that any
rebates owing in accordance with 45 CFR Part 158 are provided. Section 158.501 requires an issuer
to preserve and maintain all such documents, records, and other evidence for the MLR reporting year
as well as six prior years unless a longer period is required under §158.501. This information
collection was also approved by OMB Control Number 0938-1164 and is not being revised at this
time. The burden estimate has been updated based upon the annual reports received for the 2015
reporting year.
Section §153.520(e) requires a QHP issuer to maintain documents and records sufficient to enable
the evaluation of the issuer’s compliance with applicable risk corridors standards, for each benefit
year for at least 10 years, and must make those documents and records available upon request from
HHS, the OIG, the Comptroller General, or their designees, to any such entity, for purposes of
verification, investigation, audit or other review. The burden associated with this recordkeeping
requirement is already accounted for in the Supporting Statement approved under OMB 0938-1155.
2. Purpose and Use of Information Collection
The data collection of annual reports provided by an issuer for each State’s individual, small group,
and large group markets will be used by CMS to ensure that consumers are receiving value for their
premium dollar by calculating each issuer’s MLR and any rebate payments due for the respective
MLR reporting year, as well as verifying the provision of any rebates and rebate notices. CMS will
also use the annual reports data collection to ensure that each QHP issuer in the individual or small
groups market either pays or receives accurate risk corridors amounts.
The standardized notices will be used to ensure that consumers are receiving information about the
rebate they will be receiving, how their issuer is using health care premium dollars and about the
value they are receiving for their premium dollar. The notices will help provide greater transparency
to consumers. The recordkeeping requirements will be used by CMS to determine issuers’
compliance with the MLR and risk corridors requirements, including compliance with how issuers’
experience is to be reported, how their MLR and any rebates owed are to be calculated, distribution

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of rebates and provision of rebate notices.
3. Use of Improved Information Technology and Burden Reduction
Each issuer will submit its annual report electronically to the Secretary for each respective State and
market in which it conducts business. (OMB Control Number 0938-1086.) Information will be
collected electronically through CMS’ HIOS computer system. This will require registration of the
issuer, providing issuer information for the purpose of the collection, and will be the same process as
the one used for the 2015 reporting year. Issuers who have already registered with our MLR module
within the HIOS system will not need to register again.
4. Efforts to Identify Duplication and Use of Similar Information
There is no similar information collected related to MLR. In addition, as stated in the HHS Notice
of Benefit and Payment Parameters for 2015 final rule (79 FR 13744 (March 11, 2014)), CMS is
leveraging the similarity of the data elements between the two programs by collecting the risk
corridors data on the same form and at the same time as the MLR data. As indicated in the
Supporting Statement approved under OMB 0913-1155, CMS modified the MLR Reporting Form
approved under OMB control number 0938-1164 to add reporting elements (for example, QHPspecific premium amounts) that are required under the risk corridors data submission requirements
under §153.530.
5. Impact on Small Businesses or Other Small Entities
As stated in the Regulatory Impact Analysis of OCIIO-9998-IFC (75 FR 74864 (December 1,
2010)), CMS does not believe that the required submission of annual reports to the Secretary will
have a significant impact on a substantial number of small entities. CMS estimates that of the 545
issuers who must report annually to the Secretary in compliance with OCIIO-9998-IFC, there are
approximately 97 potentially small entities, or roughly 18 percent, who must comply with the
reporting mandate. This estimate may overstate the actual number of small health insurance issuers
that would be affected, since it does not include receipts from these companies’ other lines of
business and since almost 75 percent of these small companies belong to larger holding groups.
6. Consequences of Collecting the Information Less Frequently
Section 2718 of the PHS Act and section 1342 of the Patient Protection and Affordable Care Act
require reports to be submitted annually. CMS will use the information reported to assess whether
each issuer is in fact providing policyholders with health care value in return for their premium
dollars and to ensure that the risk corridors amounts transferred between QHP issuers and CMS are
accurate.
Regarding notices, section 2718 of the PHS Act requires issuers to provide rebates annually if they
do not meet the applicable MLR standard. Since rebates are provided annually, notices of rebates are
required to be provided to policyholders annually in order to inform policyholders about any rebates
owing.

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7. Special Circumstances Relating to the Guidelines of 5 CFR 1320.5
No special circumstances apply to these collections.
8. Comments in Response to the Federal Register Notice/Outside Consultation
CMS published the notice of the revised Medical Loss Ratio (MLR) PRA package in the Federal
Register on May 2, 2017 (82 FR 20481). The 60-day comment period closed on July 3, 2017. CMS
received six comments on a number of specific issues from various health insurance issuers and one
consumer. The consumer’s comment did not directly relate to this information collection package. A
summary of the other comments and CMS responses is attached.
The comments requested clarification of the instructions and indicated several areas in the 2016 MLR
Annual Reporting Form Instructions that contained errors and inconsistencies.
In the information collection package that will be open for 30-day public comment, CMS has revised
the 2016 MLR Annual Reporting Form and Risk Corridors Plan Level Data Form and Instructions to
correct formula errors and inconsistencies and to add the clarifications requested by commenters.
9. Explanation of any Payment/Gift to Respondents
Respondents will not receive any payments or gifts as a condition of complying with these ICRs.
10. Assurance of Confidentiality Provided to Respondents
As required by section 2718(a) of the PHS Act, CMS does intend to publish issuers’ annual reports
on its internet website. However, no individually identifiable personal health information will be
collected and consequently cannot be disclosed. Plan-specific information collected for the risk
corridors program (Risk Corridors Plan-Level Data Form), does not include personal health
information and will not be published on the CMS website.
11. Justification for Sensitive Questions
These ICRs do not contain sensitive questions.
12. Estimates of Annualized Burden Hours (Total Hours and Wages)
The burden estimates associated with the annual report, rebate notice, rebate disbursements, risk
corridors data, and recordkeeping requirements are discussed below. We have updated the burden
estimates based on the MLR experience for the 2015 reporting year and the incorporation of the risk
corridors data reporting elements into the annual report. We estimate that each annual filing and
rebate disbursement cycle will require on average 46 person-days of effort per issuer (approximately
368 burden hours divided by 8-hour work days).
Annual MLR Report
An issuer is required to submit an annual report to the Secretary for each State and market segment

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in which it issues health insurance coverage. As described in the regulatory impact analysis (RIA) of
OCIIO-9998-IFC, the preparation and submission of reports is expected to require a mix of skills.
We also estimate that issuers will use a mixture of professional staff, accounting staff, and clerical
staff to prepare, review, and issue rebate notices and rebate checks or premium credits, and to
perform recordkeeping activities and to upload the report to the HIOS system. The average hourly
compensation, including fringe benefits and overhead expenses is $55.64 for ongoing annual
reporting. 1 Previous burden estimates related to these requirements have been updated based on 2015
MLR and risk corridors data submissions.
As set out in 45 CFR §§158.110, 158.260, and 153.530, the annual report to the Secretary is
comprised of several parts: data concerning the amount the premium dollars the issuer spends each
year on claims, quality improvement expenses, non-claims costs, Federal and State taxes, licensing
and regulatory fees, and the transitional reinsurance, risk adjustment, and risk corridors amounts
based upon the relevant MLR reporting year; the correlating risk corridors calculation; the
correlating MLR and rebate (if any) calculation; and data regarding disbursement of rebates based on
the prior MLR reporting year.
On July 31, 2017, 545 issuers are expected to file a total of 2,532 annual reports with the Secretary. 2
Of the 545 issuers, 44 issuers offer student health coverage in addition to group or individual market
coverage and 9 issuers only offer student health insurance coverage. In addition, an estimated 284 of
the 545 issuers will submit approximately 382 Risk Corridors Plan-Level Data Forms as part of their
annual reports. As shown in Table 1 below, for the 492 issuers that offer coverage in the group
and/or individual markets only, it is estimated that each issuer will, on average, incur a burden of
approximately 296 hours (and an equivalent cost of approximately $16,471) annually and, because
of operating in several States and markets, will submit on average 4.7 reports a year. The 44 issuers
that are expected to submit data on student health insurance coverage in addition to data on
individual and/or group market offerings will incur additional reporting burden of 5 hours each, for a
total of 301 hours (and an equivalent cost of approximately $16,749) annually. In addition, there are
9 issuers that offer coverage exclusively in the student health insurance market. It is estimated that
each issuer will incur an annual reporting burden of 10 hours (an equivalent cost of $556). The 284
issuers that submit risk corridors related data will incur an additional annual burden of 6 hours per
report, or approximately 8.1 hours per issuer (and an equivalent cost of approximately $449). Actual
burden and cost for most issuers are likely to become lower as issuers gain experience with the form
and reporting requirements.

1

Wage Estimate: to derive average costs, we used data from the U.S. Bureau of Labor Statistics’ May 2015 National
Occupational Employment and Wage Estimates for all salary estimates (http://www.bls.gov/oes/current/oes_nat.htm). In this
regard, the wage data on the following pages includes the cost of fringe benefits and the adjusted hourly wage.
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These numbers are based upon the actual MLR reports that issuers filed for the 2015 MLR reporting year. A report includes
data for multiple markets (individual, small group, large group) for an issuer in a State. An issuer may combine multiple reports
in one filing.

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Table 1: Burden and Cost Estimates for Annual Report
Form

Annual Report
for issuers not
offering student
health
insurance
coverage
Annual Report
for issuers
offering student
health
insurance
coverage in
addition to
other coverage
Annual Report
for issuers
offering student
health
insurance
coverage only
Annual Risk
Corridors Plan
Level Data
Form for QHP
issuers

Frequency

492

Average
Number of
Reports per
Respondent
4.7

Private
Company

44

Private
Company

Private
Company

Type of
Respondent

Number of
Respondents

Wage per
Hour (incl.
fringe)

Burden Cost
Per
Respondent

1

Estimated
Burden
Hours per
Respondent
296.01

$55.64

$16,471

Total
Estimated
Burden
Hours
145,637

Private
Company

4.7

1

301.01

$55.64

$16,749

13,244

9

1

1

10

$55.64

$556

90

284

1.35

1

8.1

$55.64

$449

2,292

Notice of Rebate and disbursement of rebate checks
The regulation also requires each issuer that does not meet or exceed the minimum MLR standard to
provide rebates to its policyholders as well as notice of such rebates to policyholders and to
subscribers of group policyholders.
It is estimated that 106 issuers in the individual and group markets will owe rebates and each issuer
will provide rebate notices to approximately 27,826 policyholders and subscribers on average (Table
2). We estimate that approximately 11,906 notices will be sent per issuer electronically and
approximately 15,920 notices will be sent per issuer by first class U.S. mail. We assume that the cost
of sending notices electronically is negligible. The cost for sending notices via U.S. mail for each
issuer is estimated to be roughly $9,313 ($35.03 per hour x 265.87 burden hours) in labor costs and
approximately $8,597 (15,920 notices x $0.54 mailing and supply costs per notice) in mailing costs,
for a total annual cost of approximately $17,910 (Table 2).

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It is estimated that approximately 41 issuers in the individual market will disburse rebates in some
form to subscribers by September 30 of the year following the end of the MLR reporting year,
whether by premium credit, check, or refund via credit or debit card (Table 2). Assuming that the
issuers will disburse 50% of the rebates in the form of an actual check, we project that each of these
41 issuers will issue approximately 10,731 checks on average. Each issuer is estimated to expend
approximately $12,163 in labor costs and an additional $536 in processing costs, for a total ongoing
cost of approximately $12,699 a year (Table 2). The remaining rebates will be issued through
premium credit or refunds via credit or debit card. Costs of paying rebates through one-time
electronic reimbursement are expected to be negligible. It is estimated that approximately 74 issuers
in the group market (including some of the issuers that also owe rebates in the individual market)
will provide rebates to policyholders for disbursement to subscribers. We expect that the rebates to
policyholders will be issued electronically and the related costs will be negligible.
Table 2: Burden and Cost Estimates for Notice of Rebates and Disbursement of Checks
Type of
Respondent
and Forms

Number of
Respondents

Average
Number of
Notices or
Checks per
Respondent

Estimated
Burden
Hours per
Rebate
Cycle

Wage per
Hour (incl.
fringe)

27,826

Average
Mailing
and
Supplies
Cost Per
Notice or
Check
$0.54

Private
Company for
Notice of
rebates to
Subscribers
and
Policyholders
Private
Company for
Disbursement
of checks

106

41

Total
Estimated
Burden
Hours
(Ongoing)

$35.03

Total
Estimated
Burden Cost
for Notices
or Checks
Per
Respondent
$17,910

265.87

10,731

$0.05

268.27

$45.34

$12,699

10,999

28,182

As issuers gain experience with the MLR requirements, it is likely that fewer issuers will owe rebates
to fewer enrollees in future years and therefore the burden and costs associated with the rebate
notices and disbursement of checks will be lower as well.
13. Estimates of other Total Annual Cost Burden to Respondents or Record Keepers/Capital Costs
Recordkeeping Requirements
Each issuer is also obligated to maintain all documents, records and other evidence that supports the
data submitted by the issuer in its annual report(s) to the Secretary.
Each of the 545 issuers expected to submit an annual report to the Secretary must maintain the
supporting documentation for seven years. We estimate that each issuer will spend approximately
$15 a year (Table 3) in maintaining the supporting documents for the respective MLR reporting year.

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Each QHP issuer is also required to maintain documents and records related to risk corridors data for
each benefit year for at least 10 years. The burden associated with this recordkeeping requirement is
already accounted for in the Supporting Statement approved under OMB Control Number 0938-1155.
Table 3: Burden and Cost Estimates for Retention of Records
Forms (if
necessary)

Type of
Respondent

Retention
of Records

Private
Company

Number of
Respondents

Average
Number per
Respondent

Frequency

545

4.7

1

Estimated
Burden Hours
per
Respondent
(Ongoing)
0.28

Total
Estimated
Burden
Hours
(Ongoing)
152.76

Wage per
Hour
(including
fringe)
$51.88

Burden Cost
for Annual
Retention of
Records Per
Respondent
$14.54

14. Annualized Cost to Federal Government
Table 4: Estimate of Cost to Federal Government
Type Federal
Employee Support

Total Burden Hours per Reviewer

Data Analysis

3 hours per data submission for
each Annual filing (545 filers once
per year – 1,635 hours) 5

Total
Reviewers
1

Hourly Wage Rate
(GS 14 equivalent) –
(includes fringe)
$73.00

Total Federal
Government
Costs
$119,363

Salaries are based on a 14 Grade/Step 1 in the Washington DC area and include benefits.
15.

Explanation for Program Changes or Adjustments

Based upon CMS’ experience in the MLR and risk corridors data collection and evaluation process,
CMS is updating its annual burden hour estimates to reflect the actual numbers of submissions, rebates
and rebate notices.
In 2017, it is expected that issuers will submit fewer reports on average, and send fewer notices and
rebate checks to policyholders and subscribers, which will reduce burden on issuers. It is estimated that
there will be a net reduction in total burden from 235,148 to 200,597.
CMS did not receive any comments regarding the burden estimates published on May 2, 2017 in the 60day Federal Register Notice (82 FR 20481). Modifications to the instructions and collection instruments
are the result of comments and have been made to correct errors and to provide additional clarifications.
These modifications do not affect the burden hours or costs previously estimated. CMS has not
identified any other factor that would necessitate a change to the burden estimates.
16. Plans for Tabulation and Publication and Project Time Schedule
The annual report of MLR and risk corridors data for the 2016 reporting year is due to the Secretary by
July 31, 2017.
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A data submission includes filings for all States by a single issuer.

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17. Reason(s) Display of OMB Expiration Date is Inappropriate
The expiration date and OMB control number will display on the front page (top-right corner) of each
instrument.

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