Medical Loss Ratio Provision of the Affordable Care Act – Less For ICD-10 and Other Reform Issues

More than one in five of all  consumers who are covered under  individual health plans today are insured by companies that spend more than 30 percent of the premium dollar billed on administrative costs.  And, more than one in four are insured by health plans that spend between 25 and 30 percent of every premium dollar on administrative costs.

However on November 22, 2010 the Obama Administration’s regulation implementing  new standards for the “medical loss ratio” provision of the Affordable Care Act will make the insurance industry more transparent and is intended to enable consumers to purchase health insurance that provide more value for every dollar paid for premiums.

Estimates are  that up to 9 million Americans could be eligible for rebates starting in 2012 worth up to $1.4 billion.  The average amount that could be rebated per person could total $164.  MLR rules are in effect now in 2011 and payment of rebates is mandated to begin in 2012.

This creates a double bind for health plans who already must spend more of their IT and operations expenses on compliance with new health care standards including the EDI standard HIPAA 5010 and medical coding standard ICD-10.  If a plan is wasteful and does not provide good value, then the MLR rules will have a favorable effect fo that plan’s members.  On the other hand, ICD-10 is expected to be expensive and span over three years.  We believe that the MLR rules could challenge some health plans to squeeze in new expenses in an already tight fifteen percent of premium dollars received.   ICD10, HIPAA 5010, and other regulations continue to challenge the health care industry.  Meanwhile, health plans with Medicare Advantage contracts are also investing in quality improvements to access federal incentives under the 5-Star Rating system.    The 5-Star system is another method that the government is already mandating to improve the quality of care, provide incentives for high performance and penalties for poor performance.

We expect collisions in these various initiatives, which have overlapping impact and in some cases redundant mandates.

Michael F. Arrigo

Michael is Managing Partner & CEO of No World Borders, a leading healthcare management and IT consulting firm. He serves as an expert witness in Federal and State Court and was recently ruled as an expert by a 9th Circuit Federal Judge. He serves as a patent expert witness on intellectual property disputes, both as a Technical Expert and a Damages expert. His vision for the firm is to continue acquisition of skills and technology that support the intersection of clinical data and administrative health data where the eligibility for medically necessary care is determined. He leads a team that provides litigation consulting as well as advisory regarding medical coding, medical billing, medical bill review and HIPAA Privacy and Security best practices for healthcare clients, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, physician compensation, Insurance bad faith, payor-provider disputes, ERISA plan-third-party administrator disputes, third-party liability, and the Medicare Secondary Payer Act (MSPA) MMSEA Section 111 reporting. He uses these skills in disputes regarding the valuation of pharmaceuticals and drug costs and in the review and audit of pain management and opioid prescribers under state Standards and the Controlled Substances Act. He consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises ERISA self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $8 billion in healthcare mergers and acquisitions. Education: UC Irvine - Economics and Computer Science, University of Southern California - Business, studies at Stanford Medical School - Biomedical Informatics, studies at Harvard Medical School - Bioethics. Trained in over 10 medical specialties in medical billing and coding. Trained by U.S. Patent and Trademark Office (USPTO) and PTAB Judges on patent statutes, rules and case law (as a non-attorney to better advise clients on Technical and Damages aspects of patent construction and claims). Mr. Arrigo has been interviewed quoted in the Wall Street Journal, New York Times, and National Public Radio, Fortune, KNX 1070 Radio, Kaiser Health News, NBC Television News, The Capitol Forum and other media outlets. See and for more about the company.

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