December 14, 2016

Medical Loss Ratio Minimum Requirements Save Taxpayer Dollars

By the C|C Whistleblower Lawyer Team

Last month the Department of Health and Human Services’ Office of the Inspector General (OIG) published a report about the Medicaid Managed Care program and the potential savings related to a minimum medical loss ratio (MLR). An MLR is, generally, the percentage of premium revenues an insurer spends on clinical services and quality improvements as opposed to on things like executive salaries, overhead, or marketing. The purpose of the OIG report was to determine the potential savings that could have been achieved if Massachusetts had required Medicaid Managed Care organizations to meet a minimum MLR standard, or pay remittances if the standard was not met. Medicare, under the Affordable Care Act (ACA), currently requires that the MLR be 80 or 85% depending on certain conditions. Violating the rule can be a violation of the False Claims Act (FCA).

A number of states have similar requirements for Medicaid. For example, Florida requires the MLR be 80% or higher. Wellcare (an insurer) settled a FCA suit for $137.5 million that revolved around violating the required threshold. Massachusetts does not currently have such a provision. 

The OIG report focused on the 815,000 Medicaid beneficiaries in Massachusetts during 2014. The Massachusetts Medicaid program (MassHealth) made $4.7 billion in payments to Managed Care Organizations (MCOs) in 2014. After sampling 10 MCO plans in the state, the OIG concluded that the state could have saved $4.7 million if it had an MLR rule similar to the federal rule just on those 10 MCO plans. The report recommends Massachusetts adopt an MLR requirement similar to or in replica of the Federal requirement.

In states that require an MLR minimum, or in the case of Medicare, MLR fraud can be hard to detect without an insider. Plans can commit such fraud by, for example, paying provider claims that should have been denied, making duplicate payments to providers, and/or falsely classifying administrative expenses as medical ones. In the Wellcare case, the fraud was brought to light by four whistleblowers who worked for Wellcare or its affiliates. The whistleblowers received a combined reward of $25 million dollars for their tip.

To find out more about whether a particular type of fraud is actionable under the False Claims Act, contact us today.

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