OIG recently issued a report determining that South Carolina’s Medicaid Managed Care program would not have realized any savings if the state agency implemented a minimum Medical Loss Ratio (MLR) similar to the current Federal standard for certain private health insurers and Medicare Advantage plans. 

The MLR requires health insurers to spend a significant portion of consumers’ premium dollars on medical care, rather than on administrative costs and profits. On May 6, 2016,    CMS issued a final rule requiring Medicaid Managed Care Organizations (MCOs) to achieve a minimum MLR of at least 85 percent, effective July 1, 2017.

To determine the potential impact of the MLR requirement on state Medicaid programs, OIG reviewed CY 2014 cost and premium revenue data for six South Carolina MCOs. The report found that South Carolina “would not have realized any Medicaid savings in CY 2014 if the state agency had (1) required its Medicaid managed care plans to meet minimum MLR standards . . . and (2) required remittances when Medicaid managed care plans did not meet MLR standards.”

The MLR has been a controversial portion of the Affordable Care Act.  Democrats argue the requirement ensures premium dollars are spent on patient care, while Republicans criticize the MLR, arguing that the requirement contributes to fraud and improper payments.  In fact, one GOP ACA repeal and replace plan will likely seek to eliminate or significantly reduce the requirement.  Republicans may point to reports like this to support their position that MLRs are ineffective.