During these unprecedented times, health plans and the healthcare industry in general are still coming to terms with impact of post-COVID reality. While lower utilization has led to decrease in medical spending, economic drivers have also impacted enrollments and premiums. Assuming medical spending will not surge in the immediate future, most health plans will struggle to maintain their Medical Loss Ratio (MLR), and this will eventually lead to premium rebates. Overall, there are 4 approaches to this evolving situation:
COVID-19 Impact on Payer MLR
The Q2 2020 financial results for health plans have not been great for their MLR ratios which have seen drops in the double digit percentage point ranges. For instance, United Healthcare’s MLR fell to 70% for Q2 2020. CitiusTech recently conducted a study with Horman Mathematical & Actuarial (HMA) Solutions, an actuarial healthcare and regulatory consulting company, to understand the impact of COVID-19 on payer’s MLR. HMA Solutions estimates that the ratio will be approximately 5% for year 2020.
For instance, a health plan with $1 billion premium would need to return a surplus of $50 million through premium rebates, or identify options to increase medical spending. More importantly, health plans should ensure that the medical spending adds value to member care. Additional investments in better care delivery support mechanisms and quality improvements can be suitable options for payer organizations to modernize population health.
Quality Improvement: Benefits for Payers
Investments to enhance quality management can help payers control their MLRs and reduce their premium rebate rate. This can be achieved if payers meet the necessary criteria mandated by HHS regulations (45 CFR § 158.150) which suggest:
While payer organizations could invest in numerous ways to meet the criteria, they should take early action to invest in a modern and flexible quality improvement solution which can drive long-term value-based quality management initiatives. The solution will also help payers manage the upcoming regulatory and technology changes such as FHIR®, dQM, and NLP. This will put payers in a better position to front load their investments and have budgets to thrive in the immediate post COVID-19 future, especially as medical utilization picks up.