UHC Medicare Plan Suspended for Failing to Meet Medical Loss Ratio

October 15, 2019 - In a letter released on September 11, CMS informed UnitedHealthcare that its Medicare contract H5322 through Care Improvement Plus failed to meet its medical loss ratio requirement for the third year in a row and, as a result, would be suspended for the year.

“As a result of this determination, Care Improvement Plus will be prohibited from accepting any MA-PD plan enrollments which would be effective January 1, 2020, through December 1, 2020,” CMS announced.

Each year, a plan must achieve a certain medical loss ratio (MLR), meaning a certain amount of every premium dollar must go to consumers’ medical claims or health improvement. If payers overreach this threshold, putting more premium dollars toward administration and health plan upkeep, the payers must pay it back to their consumers in the form of a rebate.

As a Medicare contract on the large group health insurance market, UHC is required to reach an 85 percent MLR for Care Improvement Plus’s H5322 contract, such that $0.85 out of every premium dollar goes toward beneficiaries’ health needs.

Care Improvement Plus has gradually been ramping up the plan’s MLR to meet that threshold but missed the mark. In the past three years, UHC paid 71.3 percent for calendar year (CY) 2016, 83.9 percent for CY 2017, and 84.1 percent for CY 2018.

Meeting the medical loss ratio stipulation has been a challenge for payers for years. In the past, fraud prevention and recovery have prevented payers from reaching their required MLRs.

For UHC, the payer says, the inhibitor was the corporate tax rate.

“In mid-2019 a change in the corporate tax rate went into effect, which adversely impacted MLR for H5322 plans,” the payer explained in a written statement to HealthPayerIntelligence.com.

“We subsequently factored that change into our MLR calculations and anticipate achieving an MLR above 85 percent in 2019, which will allow us to enroll new members for 2021. We anticipate that we will achieve the MLR threshold in 2019 for H5322, which will allow us to resume enrollment in these plans in 2021.”

The payer noted that there are alternative UHC plans in the affected areas and promised an increase in benefits and coverage for existing members, which includes 40,000 dually eligible members.

While Care Improvement Plus may not accept new enrollees after December 1, 2019, those who already have a Care Improvement Plus plan will still receive coverage. For employers, Care Improvement Plus may submit a waiver to enroll more individuals to their existing group health insurance plans but they may not bring on new groups for employer sponsored insurance.

If the plan fails to meet the 85 percent MLR requirement for five consecutive years, the contract must be terminated.

UHC is not alone in facing a reprimand from CMS, however it is the only plan that failed to meet the MLR so far this year. CMS has placed 13 sanctions this year, including the one on Care Improvement Plus South Central Insurance Company, as well as one termination.

MLRs were instituted to protect consumers’ interests and ensure that they are receiving benefits for their premium dollars. It has been discussed as a potential method of holding dental insurers accountable to investing appropriately in consumer care as well. For example, when California realized in 2018 that only $0.76 of every premium dollar goes towards a consumer’s health under the average California dental plan, the state instituted an MLR for the dental industry.

While MLRs set up protections for consumers and incentives for payers to increase benefits, MLRs are also driving payers’ rebates to historic levels, particularly in individual health insurance market. On the individual health insurance market alone, payers will be paying back $1.3 billion to members this year, the highest amount since the Affordable Care Act took effect.

While UHC’s plan is suspended for a year, the payer will invest more premium dollars into members’ benefits, over and above its 2018 increases. UHC’s scenario draws attention to the potential challenges payers face in maintaining an MLR and the goals of such an approach.