Adhering to the Medical Loss Ratio Rule While Improving Member Outcomes
How Medicare Advantage plans and Medicaid MCOs can return money to members while also improving MLR and quality scores
October 28, 2020

The Medical Loss Ratio (MLR) rule requires that plans spend a set percentage of their revenue and premiums on healthcare and quality improvements—rather than on administrative costs. Plans who spend less than the designated percentage on qualified expenses may be required—in some states—to refund those costs.

While the percentage varies based on whether the insurers are in a large, individual, or small group market, for both Medicare Advantage and Medicaid MCOs, the cut off is 85%.

The High Cost of MLR Rule-related Rebates

Qualified expenses that plans can count toward the 85% include health care services, covered benefits, and quality improvement events. Yet even with these various options, some plans are still struggling to meet the MLR requirements. 

Last year, the amount of MLR rebates sent out was double what was sent in 2018. 9 million people received MLR rebates, or $1.37 billion total—the largest amount since the rule’s establishment. 

These 9 million represent significant expense to the payer—without improving any health outcomes. By allocating more resources upfront to improving member care and meeting quality metrics, payers can ensure money is being put toward initiatives that can actually improve member outcomes. 

Investing in Members Upfront to Avoid Penalties and Improve Quality Measures

With the 2020 pandemic, health plans are seeing fewer claims cost—with Medicare Advantage gross margins jumping 41% over last year. While an increase in profits is positive, plans will still need to ensure that 85% of all revenue goes toward qualified health care services and improvement measures—even if claims are down. 

Plans can strengthen member outcomes, and meet spending benchmarks, by investing this money back in more programs that improve member health. 

Programs like Wellth that incentivize positive healthy behaviors—such as med adherence for Medicaid members, regular glucometer and blood pressure readings, healthy eating, and more—fit within qualified improvement expenses toward your 85%. 

With Wellth, members receive daily updates reminding them to check-in with reminders like meds, blood pressure, and other key tasks for adhering to their care plan. In addition, members are monetarily incentivized to complete their check-ins, using principles of loss aversion to improve adherence. 

A Win-Win-(Win!)

Incentivizing members to make healthy decisions through programs like Wellth can prove to be a win-win-(win!) for plans, providers, and members alike. 

Win 1: Improving member health outcomes

Improving care plan adherence helps reduce unnecessary and expensive medical claims—including preventable ED visits, hospitalization, readmissions, and more.

Members on the Wellth program have been able to achieve significant outcomes in both reducing acute care and improving member health outcomes.

For example: 

  • Staten Island Performing Provider System saw a 92% reduction in unnecessary ED utilization, and its members with diabetes saw an average 1.29 reduction in HbA1c
  • In an RCT with UPenn, members in the Wellth program saw a 45% reduction in 90-day readmissions

“Prior to joining Wellth's program, I had a number of health issues - anemia and colon surgery. Since I’ve been on the app, I’m no longer anemic, and I am so much more aware of my sugar intake.”

- Wellth member

Win 2: Rebates that improve ROI 

By investing money into meaningful, result-driven programs for members, plans can more easily meet the 85% standard—without throwing away money on less-effective initiatives for the sake of meeting a benchmark. 

Wellth’s payment structure is at-risk, so our clients don’t pay unless they get results. This means that while other plans are losing money to member rebates, plans utilizing the Wellth platform are seeing an average 2-6x ROI for each member enrolled. 

Win 3: Providing financial benefits for low-income populations 

The MLR rule was originally set up to help protect members from predatory health plan premiums, with rebates for members who were not provided with appropriate healthcare and quality for the premiums they paid. 

In 2019, the average MLR rebate per person was $154. Programs like Wellth also allow plans to give back to members—while actually improving patient outcomes for long-term ROI. 

With Wellth’s incentive programs, members are able to earn a set amount of money each month—contingent upon their care plan adherence. For our members, this money goes a long way, with a majority of our members using their rewards for groceries and to fill prescriptions. 

“I enjoy getting paid for taking my meds and checking my glucose. We’ve used the money to help pay for groceries and other expenses—like laundry soap. With the reminders and incentives, I now check my glucose levels regularly and on-schedule, my glucose levels have gone down, and I need less insulin.”

- Wellth Medicaid-Eligible Member 

To learn more about the benefits of paying members, check out our recent blog post, 7 Reasons Paying Members Could Actually Save Health Plans Money.