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The Importance of Medical Loss Ratio Minimum Requirements

Posted  January 24, 2017

By the C|C Whistleblower Lawyer Team

We’ve covered Medical Loss Ratio (MLR) minimum requirements before. The 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. Requiring a minimum MLR standard, something that the Federal Medicare Program does and several State Medicaid programs do, can save these taxpayers millions of dollars annually. Violating MLR standards, where they exist, might be a violation of the False Claims Act, and private insurers, such as Wellcare, have paid millions to settle cases for doing just that.

Now, Department of Health and Human Services’ Office of the Inspector General (OIG) published a report about potential savings to the South Carolina Medicaid Managed Care Program. The OIG analyzed potential savings if South Carolina required its Medicaid program to conform to Federal MLR standards, which say that either 80 or 85% (depending on certain conditions) of premiums must be spent on clinical services or quality improvements. This report focused on six Healthy Connection managed care plans for contract year 2014. These six plans generated $2.5 billion in premiums during that time.

The report concluded that this was a rare case where Federal MLR requirements would not have saved the state any money. In the sample the OIG took, all six plans had MLRs greater than 85%. However, MLR would save other states millions of dollars, such as Massachusetts.

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.

Tagged in: FCA Federal, Managed Care, Medicaid, Medicare,