A medical loss ratio is the percentage of premium revenue an insurer spends on medical care for its members as opposed to things like overhead costs. CMS did not require states to have a minimum MLR for Medicaid managed care organizations when the audit took place.
The audit, filed this November, was used to map potential Medicaid savings if the Massachusetts Executive Office of Health and Human Services required Medicaid managed care plans to meet the same MLR standard as required for private insurers, Medicare Advantage plans and Medicare Part D plans. Costs and premium revenue data from 2014 for 10 MassHealth managed care plans were reviewed in the audit.
The OIG recommended that MassHealth do the following:
- Incorporate the MLR standard adopted in the CMS final rule — setting the MLR to 85 percent spent strictly on medical care — into the agency’s Medicaid managed care organization contracts
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Consider implementing a remittance requirement — a payment to CMS if the MLR is below 85 percent — if appropriate
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