CMS-2011-0034-0004.1 (Aetna)

April 25, 2011
Submitted via www.regulations.gov
Office of Strategic Operations and Regulatory Affairs
Center for Medicare and Medicaid Services
Attention: Document ID No./OMB Control Number CMS-10373
Room C4-26-05
7500 Security Boulevard
Baltimore, Maryland 21244-1850
Re: Request for Comments Regarding the Quarterly MLR Reporting Form for
Expatriate and Limited Benefit Plans
Dear Sir or Madam:
Aetna welcomes the opportunity to respond to the Department of Health and Human
Services' ("HHS's" or the "Department's") Request for Comments Regarding the
Quarterly Reporting Form for Medical Loss Ratios ("MLRs") of Expatriate and Limited
Benefit Plans (76 Fed. Reg. 16789 (March 25, 2011), issued pursuant to § 2718 of the
Patient Protection and Affordable Care Act (the "ACA" or the "Act"), and the
Department's Interim Final Rule ("IFR") governing the reporting and calculation of MLR
(75 Fed. Reg. 74864 (December 1, 2010)).
Aetna is one of the nation's leading diversified health care benefits companies, providing
members with information and resources to help them make better informed decisions
about their health care. Aetna is committed to working with HHS in developing
standards relating to the reporting of MLR for expatriate and limited benefit plans that will
avoid unintended consequences for insurers, consumers, and employers. Accordingly,
we submit the comments below for HHS's consideration.
1.

Expatriate and Limited Benefit Plan Coverage Should Be Reported On a
National Basis

As currently drafted, the quarterly reporting form requires that insurers report the MLR
experience of their expatriate and limited benefit plan coverage on a state-by-state
basis. We respectfully submit, however, that this state-by-state reporting system for
such coverage is inappropriate.
With respect to expatriate coverage, the individuals covered by such policies do not
reside in the United States (let alone any particular state), and expatriate coverage has a
number of unique characteristics that do not lend themselves to state-by-state reporting.
Indeed, the IFR itself provides that "[f]or the 2011 reporting year, an issuer of [expatriate
coverage] must aggregate the experience for these policies but report the experience
from such policies separately from other policies." 45 CFR § 158.120(d)(4) (emphasis
added). Accordingly, we recommend that HHS modify the quarterly reporting form to
permit national aggregation of expatriate coverage.

By definition, expatriates are not residents of any state, so the concept of a state-based
MLR has no relevance for expatriate coverage. See 45 CFR 158.120(d)(4) (describing
expatriate plans as those covering "employees working outside their country of
citizenship, employees working outside of their country of citizenship and outside the
employer's country of domicile, and non-U.S. citizens working in their home country[.]"
(Emphasis added). In the IFR, the Department recognized that expatriate plans have
unique features that are not comparable to any domestic plans, which makes an annual
MLR assessment subject to large fluctuation. See 75 Fed. Reg. at 74871. Among other
things, expatriate plans have substantially higher administrative costs than domestic
plans, given that insurers offering such plans must provide customer support 24 hours a
day, year round, and must engage in an exceedingly complex claims administration
process involving non-standardized claims submission systems and multiple currencies
and languages.
Additionally, insurers offering expatriate plans must hire employees who can speak
multiple languages, and must establish a global network of contracted, qualified foreign
health care providers, while maintaining online databases that allow members to
understand, access, and navigate health care services in countries all over the world.
Moreover, expatriate plans must provide highly specialized (and costly) benefits such as
emergency evacuation services, to ensure that their members have access to quality
health care wherever they may be assigned in the world. See 75 Fed. Reg. at 74871
(detailing what HHS recognized as the "special circumstances" of expatriate plans that
require an MLR adjustment).
Further, the claims experience of expatriate plans is likely to vary significantly based on
the locations in which participants are living, which makes the concept of a state-based
MLR reporting system all the more inappropriate. Indeed, the claims experience of
expatriate plans tends to be significantly more volatile than the experience of similarlysized groups resident in the United States. For example, a single large claim, such as
the evacuation of a critically-ill worker in a remote location, can make a meaningful
difference in the experience of an expatriate group in a year. And given that many
expatriate plans are also relatively small, there are additional difficulties with respect to
the pricing of a predictable annual MLR, which further makes the concept of a statebased MLR reporting system inappropriate for expatriate plans.
Applying a state-based MLR reporting system on expatriate plans imposes a significant
burden on insurers that provide such coverage, which could penalize expatriate
employees in the form of reduced support services. Further, the global aspect of
expatriate plans means that U.S. insurers are competing with foreign-based insurers to
provide such coverage. The application of a state-based MLR reporting system to
expatriate coverage would subject U.S. insurers to significant administrative burdens
that would not be imposed on foreign insurers, who are exempt from the ACA's MLR
requirements entirely (see 75 Fed. Reg. at 74871), placing American insurers at a
further disadvantage to foreign insurers.
With respect to limited benefit plans, a state-by-state MLR reporting system is also
inappropriate. The Department has recognized that the cost of administering benefits for
a limited benefit plan is far greater, as a percentage of premium collected, than is the
case for an insurer that is administering a more robust health plan. See 75 Fed. Reg. at
74872. And limited benefit plans often serve small employers that employ individuals
with higher employee turnover rates. Id. Insurers offering limited benefit plan coverage

2

could have just a few group customers in a given state that comprise a relatively small
number of covered lives, and the credibility adjustment in the MLR regulation is generally
insufficient to address this issue. Similarly, because the number of covered lives in a
particular state may be so small, and subject to such high turnover, claims experience
and loss ratios for limited benefit plans could be subject to wide swings from year to
year. Further, the IFR's requirement that limited benefit plan insurers disaggregate their
expenses on a state-by-state basis is administratively complex and expensive, and will
require these insurers to spend significant amounts on systems changes, which will have
to be passed onto group customers, which are generally small businesses that are least
able to absorb such cost increases.
Recommendation: Given the unique characteristics of expatriate and limited benefit plan
coverage, we recommend that the Department modify the quarterly reporting form to
permit an insurer to report the MLR experience of its expatriate and limited benefit
coverage on a national basis.
2.

Information Reported on the Quarterly Form Should Be Exempt from
FOIA Disclosure

We appreciate the Department's statement that it "does not intend to publish the
quarterly reports on HHS' website or otherwise." See HHS Supporting Statement for
Emergency PRA – Quarterly Reporting for Mini-Med Plans and Expatriate Plans," at p. 3
(March 25, 2011). Indeed, much of the information detailed on the draft quarterly
reporting form is highly sensitive commercial and financial information that is treated as
proprietary and confidential by insurers, such as premium earnings, direct premiums
written, salary and benefit expenses, and underwriting gains and losses. Additionally,
given that the form requires data to be reported state-by-state on a legal entity basis –
and further broken down by individual, small group, and large group coverage – there
will be circumstances in which only one customer's data will be reported on the form,
thereby exposing sensitive commercial and financial information about that customer to
HHS.
As such, public disclosure of the data reported by an insurer on the quarterly reporting
form could cause significant harm to the insurer, and could potentially have anticompetitive effects if such information is available to other insurers.
Recommendation: HHS should clarify that the data reported by an insurer on the
quarterly reporting form will be treated as exempt from disclosure under the Freedom of
Information Act ("FOIA"), pursuant to FOIA Exemption No. 4 (5 U.S.C. § 552(b)(4)), which
permits a federal agency to refuse disclosure of information that constitutes "trade secrets
and commercial or financial information obtained from a person [that is] privileged or
confidential." Additionally, the form should have a place on which an insurer may designate
the reported data as being "Confidential Commercial and Financial Information Exempt From
FOIA Dislosure."
Alternatively, consistent with Executive Order No. 12600, we recommend that HHS provide
insurers with copies of any FOIA requests that cover the insurers' respective quaterly reports,
and afford the insurer at least five business days to advise HHS as to any specific data that
the insurer believes is exempt from FOIA disclosure.

3

3.

The Form Should Be Available In Excel Format, and Modified In Several
Respects

HHS has stated that insurers will be required to submit the quarterly reporting form
electronically, but to date, only a pdf version of the form is available. Electronic
submission would be greatly facilitated if HHS made the final version of the form
available as an Excel spreadsheet.
Additionally, HHS should designate an email address (or other web-based filing
address) to which the form is to be sent or uploaded. We also recommend that HHS
modify the form in several respects, as described below.
Recommendation: HHS should:

4.

a.

Make the quarterly reporting form available in Excel format;

b.

Publish an email (or other) address to which the form will be
sent for filing/uploading;

c.

Modify the form to allow insurers to designate a contact person
that HHS may contact with any questions about data reported on
the filing; and

d.

Modify the form to allow insurers to identify the reported data as
"Confidential Commercial or Financial Information Exempt From
FOIA Disclosure."

Data Reported On the Form Should be Modified For Consistency with
Financial Statement Reporting and the April 1, 2011 Health Care
Supplemental Exhibits

The quarterly reporting form seeks detailed financial information and other indicators for
an insurer's limited benefit and expatriate plans, but as currently drafted the form is, in
several critical respects, inconsistent with financial statement reporting and the Health
Care Supplemental Exhibits that were filed on April 1, 2011 with the National
Association of Insurance Commissioners (the "NAIC") by Aetna and other insurers.
These inconsistencies could have a material impact on the MLR experience reported
for expatriate and limited benefit plans.
For example, Part I of the Form requires insurers to report their tax on net investment
income and capital gains, without reporting the insurer's actual net investment income
and capital gains, which is inconsistent with the April 1st Health Care Supplemental
Exhibits and standard financial statement reporting. And Part II of the form omits
reporting of critical data about incurred claims, direct claim reserves, and healthcare
receivables that could potentially cause an overstatement of the insurer's claims
expenses for the quarter. In calculating the incurred claims amounts, the form only
collects data regarding claims liability, direct claim reserves, and healthcare receivables
for the quarter at issue, without gathering data as to the insurer's prior year-end balance
in such categories, from which changes to such categories may be measured. Similarly,
the form's instruction that insurers exclude pharmacy rebates means that that insurers
will be reporting their healthcare receivables without taking into account the income-

4

side, which will result in an understatement of the insurer's rebates. Additionally, claims
based assessments are excluded from the quarterly report.
The proposed form's inconsistencies with existing financial reporting standards not only
raises the possibility of quarterly reports that could inaccurately reflect the insurer's MLR
experience for expatriate and limited benefit plans, but it also imposes very significant
financial and administrative burdens on insurers. Specifically, given that the form seeks
non-standardized data concerning a significant number of issues, insurers must engage
in a manual process to populate the form's data fields. This manual process is laborious
and time-consuming. In fact, Aetna has already expended in excess of $100,000 in staff
hours just to initiate preparations for the first quarterly MLR report – which is far in
excess of the Department's estimate that it would cost only $3,100 for an insurer to
prepare a quarterly filing. Such a significant expense is due in part to the form's request
for non-standardized data elements, and we note that such expenses are unlikely to
decrease as filings continue, if HHS continues to require such non-standardized data on
the quarterly reporting form.
Recommendation: We recommend that HHS modify the form as follows:

5.

a.

Part I, Line 6.6 ("Other Federal Taxes"): Add [new Line 6.5] to report
"Income from net investment income and capital gains;"

b.

Part II, Line 2.2: Add [new Line 2.3] to report "Direct claims liability,
as of end of prior year." Add [new Line 2.4] to report "Change in
direct claims liability (Lines 2.4 - 2.3);"

c.

Part II, (current) Line 2.3: Re-designate current Line 2.3 as "Line
2.5." Add [new Line 2.6] to report "Direct claim reserves, as of end of
prior year." Add [new Line 2.7] to report "Change in direct claim
reserves (Lines 2.7 - 2.6);"

d.

Part II, Line 2.8: Add [new Line 2.9] to report "Healthcare receivables
as of end of prior year." Add [new line 2.10] to report "Change in
healthcare receivables (Lines 2.9 – 2.8);"

e.

Modify the instructions to Part II, to include pharmacy rebates and
claims-based assessments.

HHS Should Issue Guidance Regarding the 2012 MLR Treatment of
Expatriate and Limited Benefit Plans By No Later Than August 1, 2011 and
Extend the Current MLR Treatment of Expatriate and Limited Benefit Plans

The current MLR treatment of expatriate and limited benefit plans is applicable for 2011 only.
To ensure employers that such coverage will be available in 2012 and to allow for the
effective management of coverage renewals, we respectfully request that HHS issue
guidance in the near future detailing the MLR treatment that will apply to expatriate and
limited benefit plans in 2012, and we urge that such guidance be issued by August 1, 2011.
Additionally, we recommend that HHS extend the IFR's MLR calculation method
permanently for expatriate plans and for limited benefit plans through 2014, given that

5

such plans will continue to bear the same proportionately higher administrative costs
beyond as they did in 2010-2011.
Approximately 1.4 million workers nationwide have group healthcare coverage under
limited benefit plans that cover accident- and sickness- related medical expenses. The
individuals covered by these plans typically work for employers on a part-time, seasonal,
or temporary basis and are ineligible for coverage under the employer's regular group
health plan, or are in an eligibility waiting period for an employer's regular health plan.
HHS has recognized that in the absence of the annual limits waiver program that it
established and the MLR adjustment that it provided for 2011, these individuals would be
at significant risk of losing coverage entirely. See 75 Fed. Reg. at 74872 (in which HHS
expressed its concern that over one million people could lose coverage without
appropriate regulatory relief from HHS). Importantly, these workers would not be eligible
for guaranteed issue coverage in the individual market, or federal subsidies available
through Exchanges, until 2014. Similarly, in the absence of the MLR adjustment that
HHS provided to expatriate plans, many insurers would have been forced to discontinue
expatriate coverage.
Aetna appreciates that HHS recognized the special circumstances of limited benefit and
expatriate plans, and provided an MLR adjustment for 2011. We note, however, that
such relief was not announced until late 2010 – well after employers began their renewal
discussions with insurers – and some employers were concerned that in the absence of
appropriate MLR relief, insurers would not be able to offer these products in 2011, and
therefore terminated coverage. To provide certainty to employers and workers as to the
continued availability of limited benefit and expatriate coverage, it is critical that HHS
announce the MLR treatment of such coverage for 2012 in time for employers and
insurers to effectively manage their renewal discussions, without the risk that employers
may terminate coverage altogether due to uncertainty as to the availability of such
coverage.
Recommendation: We urge the Department to announce the MLR treatment of limited
benefit and expatriate plans for 2012 by August 1, 2011.
We further recommend that HHS extend the current MLR calculation method for
expatriate plans permanently and for limited benefit plans until 2014. With such an
extension – and the certainty it brings – employers will be able to plan and make
reasonable benefit decisions during the bridge to 2014, when state exchanges will
provide access to benefits for the population currently covered by limited benefit plans.
Employers will be less likely to discontinue coverage if there is greater certainty that
these plans will be allowed to continue during this span of time. Without such an
extension, employers may use the 2011 plan year to transition employees off of any
employer-sponsored group limited benefit medical coverage. An early extension will
also be helpful to insurers, given that insurers generally need notice of any change to the
MLR calculation at least 12 months prior to the start of any calendar year of coverage to
appropriately price the cost of plan coverage, and to determine whether the insurer will
offer renewal quotes to employers seeking to renew such coverage.
6.

HHS Should Extend the First Filing Date For the Quarterly Reporting Form

HHS has requested "emergency clearance" from the Office of Management and Budget
("OMB") for the proposed quarterly form, asking OMB to approve the form by May 1,

6

2011 – the same day that insurers would be required to file their quarterly report with
HHS. See 76 Fed. Reg. at 16789. The request for OMB clearance provides that the
public comment period on the form will close April 25, 2011 – just five days before the
requested clearance date and the date by which insurers would be required to file the
form.
Aetna and other insurers have only just completed their review of the proposed form and
submitted recommendations for changes to the form. Requiring insurers to complete the
form for the first time in less than one day after its clearance by OMB is simply not
possible, especially if HHS changes the form in response to public comments (as we
hope it does). This is especially so given that (as discussed above) gathering and
analyzing the non-standardized data necessary to complete the proposed form and
verify its accuracy will consume significant administrative resources – which cannot be
provided in just one day – assuming OMB approves the form on May 1st, as HHS
proposes.
Recommendation: We recommend that HHS allow insurers until July 1, 2011 to submit
the first quarterly reporting form. We note, however, that this delayed filing date should
not delay HHS's announcement of the 2012 MLR treatment of expatriate and limited
benefit plans, given that HHS will still have at least 30 days to review the data reported
by insurers.
HHS has ample authority to issue Technical Guidance (or another form of sub-regulatory
guidance) adopting a non-enforcement policy whereby the quarterly MLR reporting
requirement for expatriate and limited benefit plans under 45 CFR §158.110(b)(2) will
not be enforced until July 1, 2011. Such guidance would be consistent with HHS's clear
regulatory authority, as well as its prior practice with respect to ACA requirements.
Specifically, HHS has inherent discretionary authority to determine its enforcement
priorities, and it is settled law that "[a]n agency's decision not to prosecute or enforce . . .
is a decision generally committed to an agency's absolute discretion." Heckler v.
Chaney, 470 U.S. 821, 831 (1985). Accordingly, an agency's adoption of a nonenforcement policy is presumptively exempt from judicial review under § 702 of the
Administrative Procedures Act ("APA"). Id. ("An agency's decision not to take
enforcement action should be presumed immune from judicial review under [APA] §
701(a)(2)"). For this reason, HHS's adoption of a temporary non-enforcement policy with
respect to quarterly MLR reporting for expatriate and limited benefit plan coverage
(which would last only until August 2011) should be presumptively immune from
challenge. Heckler, 470 U.S. at 831.
Indeed, HHS, along with the Department of Labor ("DOL") and the Internal Revenue
Service ("IRS"), have already exercised this type of authority in adopting a number of
non-enforcement policies in connection with the ACA. See DOL Technical Release
2011-01 (March 18, 2011) (in which DOL, HHS, and IRS jointly extended (and in certain
respects, expanded) DOL Technical Release 2010-02, which adopted a nonenforcement policy for policies and plans with respect to numerous aspects of the claims
and appeals IFR; IRS Notice 2011-1 (stating that compliance with ACA § 2716's nondiscrimination provisions with respect to highly compensated employees "should not be
required (and thus, any sanctions for failure to comply do not apply) until after
regulations or other administrative guidance of general applicability has been issued
under § 2716") (emphasis added); HHS Interim Procedure for Internal Claims and

7

Appeals Under the ACA (September 20, 2010) (adopting non-enforcement policy for
health insurance issuers with respect to the claims and appeals IFR); IRS Notice 201069 (October 12, 2010) (providing that "an employer will not be treated as failing to meet
the requirements of [the ACA's amendments to the Internal Revenue Code] for 2011,
and will not be subject to any penalties for failing to meet such requirements, merely
because it does not report the aggregate cost of employer-sponsored coverage . . . on
Forms W-2 issued in 2011;" Frequently Asked Questions About the Affordable Care
Implementation, Part I (September 20, 2010), FAQ-1 (announcing the intention of HHS,
DOL, and the IRS to adopt transition provisions, grace periods, and safe harbors to
achieve compliance, rather than the assessment of penalties); IFR Relating to Status as
a Grandfathered Plan, 75 Fed. Reg. 34538, 34539-40 (June 17, 2010) (noting that HHS
will not enforce the ACA's requirements with respect to insured retiree-only plans or nonfederal governmental retiree-only plans).
*

*

*

Aetna is pleased to have the opportunity to provide comments regarding the MLR
regulation. Thank you for considering our comments. Should you have any questions,
please feel free to contact me.
Sincerely,

Steven B. Kelmar
Senior Vice President, Government Affairs & Public Policy
kelmars@aetna.com
860.273.2706

8