42 U.S.C. § 300gg–18: Bringing down the cost…

Summary

Health insurers must report each year how much of the money they collect in premiums goes to patient care, to activities that improve health care quality, and to other non-claim expenses (not counting Federal or State taxes or licensing fees). Insurers must send that report to the Health and Human Services Secretary, and HHS will post the reports online for the public to see. The National Association of Insurance Commissioners had to create common definitions and ways to measure these categories by December 31, 2010, so every plan reports the same kinds of things. If an insurer does not spend enough of its premiums on care and quality, it must give rebates to enrollees starting January 1, 2011. For large-group plans the threshold is 85% and for small-group or individual plans it is 80% (a State can set higher rates, and HHS can adjust the 80% for a State if needed). The rebate equals the difference between the required percentage and the insurer’s actual percentage, multiplied by total premium revenue (not counting taxes and after accounting for risk-adjustment, risk-corridor, and reinsurance payments). Beginning January 1, 2014, the test uses a 3-year average. HHS will write enforcement rules and may set penalties, and may adjust the percentages if needed because of market changes from State Exchanges. Each U.S. hospital must also publish a yearly list of its standard charges for services.

Title 42, §300gg–18

The Public Health and Welfare, Source: USLM XML via OLRC

(a)Clear accounting for costs

A health insurance issuer offering group or individual health insurance coverage (including a grandfathered health plan) shall, with respect to each plan year, submit to the Secretary a report concerning the ratio of the incurred loss (or incurred claims) plus the loss adjustment expense (or change in contract reserves) to earned premiums. Such report shall include the percentage of total premium revenue, after accounting for collections or receipts for risk adjustment and risk corridors and payments of reinsurance, that such coverage expends—

(1)on reimbursement for clinical services provided to enrollees under such coverage;

(2)for activities that improve health care quality; and

(3)on all other non-claims costs, including an explanation of the nature of such costs, and excluding Federal and State taxes and licensing or regulatory fees.

The Secretary shall make reports received under this section available to the public on the Internet website of the Department of Health and Human Services.

(b)Ensuring that consumers receive value for their premium payments

(1)Requirement to provide value for premium payments

(A)Requirement

Beginning not later than January 1, 2011, a health insurance issuer offering group or individual health insurance coverage (including a grandfathered health plan) shall, with respect to each plan year, provide an annual rebate to each enrollee under such coverage, on a pro rata basis, if the ratio of the amount of premium revenue expended by the issuer on costs described in paragraphs (1) and (2) of subsection (a) to the total amount of premium revenue (excluding Federal and State taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance under section 18061, 18062, and 18063 of this title) for the plan year (except as provided in subparagraph (B)(ii)), is less than—

(i)with respect to a health insurance issuer offering coverage in the large group market, 85 percent, or such higher percentage as a State may by regulation determine; or

(ii)with respect to a health insurance issuer offering coverage in the small group market or in the individual market, 80 percent, or such higher percentage as a State may by regulation determine, except that the Secretary may adjust such percentage with respect to a State if the Secretary determines that the application of such 80 percent may destabilize the individual market in such State.

(B)Rebate amount

(i)Calculation of amount

The total amount of an annual rebate required under this paragraph shall be in an amount equal to the product of— (I)

(II)the total amount of premium revenue (excluding Federal and State taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and reinsurance under section 18061, 18062, and 18063 of this title) for such plan year.

(ii)Calculation based on average ratio

Beginning on January 1, 2014, the determination made under subparagraph (A) for the year involved shall be based on the averages of the premiums expended on the costs described in such subparagraph and total premium revenue for each of the previous 3 years for the plan.

(2)Consideration in setting percentages

In determining the percentages under paragraph (1), a State shall seek to ensure adequate participation by health insurance issuers, competition in the health insurance market in the State, and value for consumers so that premiums are used for clinical services and quality improvements.

(3)Enforcement

The Secretary shall promulgate regulations for enforcing the provisions of this section and may provide for appropriate penalties.

(c)Definitions

Not later than December 31, 2010, and subject to the certification of the Secretary, the National Association of Insurance Commissioners shall establish uniform definitions of the activities reported under subsection (a) and standardized methodologies for calculating measures of such activities, including definitions of which activities, and in what regard such activities, constitute activities described in subsection (a)(2). Such methodologies shall be designed to take into account the special circumstances of smaller plans, different types of plans, and newer plans.

(d)Adjustments

The Secretary may adjust the rates described in subsection (b) if the Secretary determines appropriate on account of the volatility of the individual market due to the establishment of State Exchanges.

(e)Standard hospital charges

Each hospital operating within the United States shall for each year establish (and update) and make public (in accordance with guidelines developed by the Secretary) a list of the hospital’s standard charges for items and services provided by the hospital, including for diagnosis-related groups established under section 1395ww(d)(4) of this title.

Notes & Related Subsidiaries

Editorial Notes

Amendments

2010—Pub. L. 111–148, § 10101(f), amended section generally. Prior to amendment, the section related to clear accounting for costs, ensuring that consumers receive value for premiums, standard hospital charges, and definitions.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective for plan years beginning on or after the date that is 6 months after Mar. 23, 2010, see section 1004 of Pub. L. 111–148, set out as a note under section 300gg–11 of this title.

§300gg–18 Bringing Down the Cost of Health Care Coverage