SF 720

as introduced - 87th Legislature (2011 - 2012) Posted on 02/23/2012 09:12am

A bill for an act
relating to human services; establishing medical loss ratio requirement for
prepaid medical assistance program; amending Minnesota Statutes 2010, section
256B.69, subdivision 5i.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 256B.69, subdivision 5i, is amended to
read:

Subd. 5i.

Administrative expenses.

(a) Managed care plan and county-based
purchasing plan administrative costs for a prepaid health plan provided under this section
or section 256B.692 must not exceed by more than five percent that prepaid health plan's
or county-based purchasing plan's actual calculated administrative spending for the
previous calendar year as a percentage of total revenue. The penalty for exceeding this
limit must be the amount of administrative spending in excess of 105 percent of the actual
calculated amount. The commissioner may waive this penalty if the excess administrative
spending is the result of unexpected shifts in enrollment or member needs or new program
requirements.

(b) Expenses listed under section 62D.12, subdivision 9a, clause (4), are not
allowable administrative expenses for rate-setting purposes under this section, unless
approved by the commissioner.

new text begin (c) A prepaid health plan must meet a medical loss ratio of no less than 90 percent,
calculated as specified in this paragraph. The medical loss ratio consists of a numerator
consisting only of direct expenses of providing patient care to persons covered under
the program, excluding administrative expenses. The denominator consists of the total
amount paid by the commissioner to the prepaid health plan, after subtraction of taxes
and other mandatory government assessments directly attributable to the prepaid health
plan's participation as a provider in the program being reported on. Payments by the
prepaid health plan to unaffiliated third parties or to providers or other entities that own,
are owned by, or are under common control with the prepaid health plan must be divided
into patient care expenses and administrative expenses and included in the appropriate
category for determination of the medical loss ratio.
new text end

new text begin (d) A bid submitted by a prepaid health plan may include a provision obligating the
bidder to provide extra services specified in the bid if necessary to meet the required
medical loss ratio, to the extent that the medical loss ratio would otherwise exceed 90
percent as the year progresses.
new text end