Annual Reporting and Recordkeeping Requirements

CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS)
MEDICAL LOSS RATIO (MLR) DATA FORM
FILING INSTRUCTIONS FOR CONTRACT YEAR (CY) 2018
FOR MEDICARE ADVANTAGE ORGANIZATIONS AND
PRESCRIPTION DRUG PLAN SPONSORS
As of June 6, 2019

TABLE OF CONTENTS
GENERAL INSTRUCTIONS ...................................................................................................................... 3
Introduction ............................................................................................................................................... 3
Changes to CY 2018 MLR Reporting....................................................................................................... 4
Additional Resources ................................................................................................................................ 4
REPORTING CONSIDERATIONS............................................................................................................. 6
Accounting Principles ............................................................................................................................... 6
Allocation of Expenses ............................................................................................................................. 6
Capitated Arrangements............................................................................................................................ 6
Third Party Vendors.................................................................................................................................. 6
Commercial MLR ..................................................................................................................................... 9
Commercial Reinsurance .......................................................................................................................... 9
EGWPs...................................................................................................................................................... 9
Low Income Premium and Cost Sharing Subsidies (LIPS and LICS) and Coverage Gap Discount
Program (CGDP) .................................................................................................................................... 10
MA Optional Supplemental Benefits ...................................................................................................... 10
Medication Therapy Management (MTM) Programs ............................................................................. 10
According to the Paperwork Reduction Act of 1995, no persons are required to respond to a
collection of information unless it displays a valid OMB control number. The valid OMB control
number for this information collection is 0938-1232. The time required to complete this information
collection is estimated to average 36 hours per response, including the time to review instructions,
search existing data resources, gather the data needed, and complete and review the information
collection. If you have comments concerning the accuracy of the time estimate(s) or suggestions for
improving this form, please write to: CMS, 7500 Security Boulevard, Attn: PRA Reports Clearance
Officer, Mail Stop C4-26-05, Baltimore, Maryland 21244-1850.
OMB Expiration Date: 12/31/2021

Sequestration ........................................................................................................................................... 10
Territories................................................................................................................................................ 10
Reporting Requirements ......................................................................................................................... 10
MLR Review and Non-Compliance ....................................................................................................... 11
Penalties and Sanctions ........................................................................................................................... 11
CY 2018 MLR DATA FORM .................................................................................................................... 13
MLR REPORT TEMPLATE USED IN PRIOR YEARS .......................................................................... 15
ATTESTATION ......................................................................................................................................... 22
TECHNICAL INSTRUCTIONS ................................................................................................................ 23
Workbook Versions ................................................................................................................................ 23
Workbook Formatting and Protection..................................................................................................... 23
Workbook Macros .................................................................................................................................. 24
Finalize MLR ...................................................................................................................................... 24
Circle Invalid ...................................................................................................................................... 25

GENERAL INSTRUCTIONS
Introduction
Medicare Advantage (MA) organizations and Prescription Drug Plan (PDP) sponsors must
submit an MLR Data Form to the Centers for Medicare & Medicaid Services (CMS) for each
contract offered during the Contract Year (CY) under the Medicare Advantage Program and the
Medicare Prescription Drug Benefit Program (Part D).
Organizations must submit the information via the CMS Health Plan Management System
(HPMS) in an MLR Data Form generated by the CMS MLR Reporting Tool workbook.
All contracts that received Medicare revenue during the contract year must submit an MLR Data
Form, with the following qualifications/clarifications:
•
•

•
•
•

PACE: Programs of All-Inclusive Care for the Elderly (PACE) organizations are not
required to complete the MLR Data Form.
Cost Plans and HCPPs: The MLR Data Form must be completed for the Part D portion
of the benefits offered under their contract with CMS for Section 1876 Cost plans,
Section 1833 Cost plans, and employers/unions offering Cost plans or Health Care
Prepayment Plans (HCPPs). Cost plans that do not offer Part D are not required to
complete or submit an MLR Data Form.
EGWPs: All EGWPs must be included in the MLR Data Form. EGWPs are to include
costs and revenue only for the Medicare-funded portion of each contract.
Dual-SNPs: Complete the MLR Data Form. Note that, for all plans, Medicaid costs and
revenue are not included in the MLR calculation.
State demonstrations to integrate care for dually eligible Medicare and Medicaid
beneficiaries (i.e., Medicare-Medicaid Plans (MMPs)): While MMPs do not complete
this particular MLR Data Form, they may be required to complete a separate, MMPspecific MLR report based on the requirements defined during the demonstration
development process.

The MLR Data Form collects the Medicare medical loss ratio (MLR) and remittance amount, if
any.
These filing instructions apply to the CY 2018 MLR reporting year.
An attestation must be submitted in HPMS for each MLR Data Form.
The submitted MLR Data Forms will be subject to review and audit by CMS or by any person or
organization that CMS designates. As part of the review and audit process, CMS or its
representative may request additional documentation supporting the information contained in
MLR Data Forms. Organizations must be prepared to provide this information in a timely
manner.
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If a CY 2018 remittance amount is due to CMS, there will be an adjustment to payment typically
occurring in early to mid 2020.
MLR reporting for a contract year will typically occur in December following the contract year.
However, for contracts that fail to meet the MLR threshold for 2 or more consecutive years,
MLR reporting for the following year will be required prior to the typical December timeframe.
CMS will notify affected contracts. CMS will specify a month that will allow time to implement
(1) an enrollment sanction for any contract that fails to meet the MLR threshold for 3 or more
consecutive years, or (2) contract termination for any contract that fails to meet the MLR
threshold for 5 consecutive years.
Please review any data flagged with a “red circle” validation in the MLR Data Form prior to
upload to HPMS. See the technical instructions for more information.
The MLR workbook must be finalized prior to upload to HPMS. If the workbook is not
finalized, the upload will be rejected by HPMS. See the technical instructions for more
information.
Changes to CY 2018 MLR Reporting
On April 2, 2018, CMS issued a final rule [CMS-4182-F] that significantly reduced the amount
of MLR data that MA organizations and Part D sponsors submit to CMS on an annual basis.
Under the new rule, MA organizations and Part D sponsors will only report the MLR percentage
(after any credibility adjustment) and the amount of any remittance owed to CMS for each
contract. The final rule also contained policy changes applicable beginning in CY 2019, which
will revise the MLR calculation to include in the MLR numerator all expenditures related to
fraud reduction activities (including fraud prevention, fraud detection, and fraud recovery) and
Medication Therapy Management (MTM) programs. Please note that these policy changes are
not applicable to the MLR calculation for CY 2018.
Key changes between the CY2017 and CY2018 MLR Reporting Tool workbook are listed
below.
• For contract years prior to CY 2018, a separate add-in file (MLRyyyy.xlam) was required
to be saved under C:\MLR\MLRyyyy. The functionalities/macros of the previous add-in
file have now been incorporated into the MLR Data Form workbook. See the technical
instructions section for more information.
• For contract years prior to CY 2018, the workbook collected detailed data across three
worksheets. The MLR Data Form now contains one worksheet, which collects the
Adjusted MLR percentage and Remittance Amount.
Additional Resources
In addition to these instructions, the following resources provide additional information
regarding CY 2018 MLR reporting:
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•
•
•
•
•
•
•
•

Questions regarding this MLR reporting may be addressed to: MLRreport@cms.hhs.gov.
Further information regarding Medicare MLR may be found at https://www.cms.gov/
Medicare/Medicare-Advantage/Plan-Payment/MedicalLossRatio.html.
The Medicare MLR implementing regulation may be found at https://www.gpo.gov/
fdsys/pkg/FR-2013-05-23/pdf/2013-12156.pdf.
The 2019 Policy and Technical Changes to the Medicare Advantage, Medicare Cost Plan,
Medicare Fee-for-Service, the Medicare Prescription Drug Benefit Programs, and the
PACE Program final rule [CMS-4182-F] may be found at
https://www.govinfo.gov/content/pkg/FR-2018-04-16/pdf/2018-07179.pdf.
Commercial MLR regulations, guidance, reporting instructions, and other resources may
be found at http://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-InsuranceMarket-Reforms/Medical-Loss-Ratio.html.
The Advance Notice, Rate Announcement, and Call Letter may be found at
https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/
Announcements-and-Documents.html.
For technical questions about the MLR Reporting Tool workbook, HPMS, or the upload
process, refer to the following resources:
HPMS Help Desk: 1-800-220-2028 or hpms@cms.hhs.gov

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REPORTING CONSIDERATIONS
Accounting Principles
MA organizations and Part D sponsors should use Statutory Accounting Principles to explain
how revenue is used to pay for non-claims expenditures. Non-claims and quality improving
expenses should be allocated by contract. If an expense is attributable to a specific activity, MA
organizations and Part D sponsors should allocate the expense to that particular activity.
However, if this is not feasible, then the MA organization or Part D sponsor must apportion the
costs using a generally accepted accounting method that yields the most accurate results.
Allocation of Expenses
Expenses must be allocated in accordance with the provisions in 42 CFR §§ 422.2420(d) and
423.2420(d).
Capitated Arrangements
As stated at § 422.2420(b)(2), incurred claims include direct claims paid to providers, including
under capitation contracts. Where an MA organization or Part D sponsor has arranged with a
clinical provider 1 for capitation payments rather than fee-for-service reimbursement for covered
services to enrollees, and such capitation payments include reimbursement for certain provider
administrative costs, the entire per member per month capitation payment paid to the provider
may be included in incurred claims. The full capitation amount paid to a provider for covered
services described at § 422.2420(a)(2) or § 423.2420(a)(2) could be reported as a benefit
expense, unless, the provider contract specifies a distinct fee for administrative services. If the
capitated payment includes payment for activities that improve health care quality, as defined in
§§ 422.2430 and 423.2430, the MA organization must ensure that costs for these activities are
only counted once in the numerator.
Third Party Vendors
Payments by MA organizations or Part D sponsors to third party vendors as reimbursement for
providing clinical services or supplies directly to plan enrollees are incurred claims. Payments to
third party vendors to perform services such as network development, administrative fees, claims
processing, and utilization management, are non-claims administrative costs and are excluded
from incurred costs.
However, when a third party vendor, through its own employees, provides clinical services
directly to enrollees, the entire portion of the amount the issuer pays to the third party vendor that
is attributable to the third party vendor’s direct provision of clinical services should be
considered incurred claims, even if such amount includes reimbursement for administrative costs
1

Includes capitation arrangements with both physician and non-physician providers that are licensed,
accredited, or certified to perform clinical health services, consistent with State law, and who are engaged
in the delivery of medical services to enrollees.
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directly related to the vendor’s direct provision of clinical services. The phrase “through its own
employees” does not include a third party vendor’s contracted network of providers because such
network providers are not considered employees of the third party vendor.
•

For example, a Part D sponsor may contract with a pharmacy benefit manager (PBM) to
provide clinical services directly to enrollees through a mail order pharmacy. The
sponsor’s payments to the PBM for mail order pharmacy services provided directly by
the PBM’s employees, including administrative costs related to the PBM’s direct
provision of such mail order pharmacy services, are included in the sponsor’s incurred
claims.

In circumstances where a third party vendor pays a non-employee provider or supplier to provide
covered clinical services or medical supplies to plan enrollees, the MA organization or Part D
sponsor may only include as reimbursement for clinical services (i.e., incurred claims) the
amount that the vendor actually pays the medical provider or supplier for providing covered
clinical services or supplies to enrollees. Where the third party vendor is performing an
administrative function such as eligibility and coverage verification, claims processing,
utilization review, or network development, expenditures and profits on these functions would be
considered a non-claims administrative expense and must not be included by the MA
organization or Part D sponsor in its incurred claims.
•

For example, when a pharmacy benefit manager (PBM) pays a retail pharmacy one
amount for prescription drugs covered by the plan and charges the sponsor a higher
amount (the retail spread), the sponsor may only claim the amounts paid by the PBM to
the retail pharmacy as incurred claims. The third party vendor (in this example, the
PBM) must report to the sponsor only the aggregate amount it pays all providers (in this
example, retail pharmacies) for clinical services or medical supplies to enrollees on
behalf of the issuer, by market in each State. No claim-by-claim or provider-by-provider
reporting is required.

An MA organization or Part D sponsor may count a third party vendor’s expenses as activities
that improve health care quality to the extent that the issuer and vendor can show that these
expenses were incurred for performing allowable quality improving activities on behalf of the
issuer.
•

For example, to the extent that a PBM performs functions that are designed primarily to
identify quality concerns, such as potential adverse drug interactions, those costs may be
reported, in aggregate, as expenditures for activities that improve health care quality.

Payments by MA organizations and Part D sponsors to clinical risk-bearing entities, such as
Independent Practice Associations (IPAs), Physician Hospital Organizations (PHOs), and
Accountable Care Organizations (ACOs) are treated as incurred claims if the following four
factors are met:

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(1)

(2)
(3)

(4)

The entity contracts with an issuer to deliver, provide, or arrange for the delivery and
provision of clinical services to the issuer’s enrollees but the entity is not the issuer
with respect to those services;
The entity contractually bears financial and utilization risk for the delivery, provision,
or arrangement of specific clinical services to enrollees;
The entity delivers, provides, or arranges for the delivery and provision of clinical
services through a system of integrated care delivery that, as appropriate, provides for
the coordination of care and sharing of clinical information, and which includes
programs such as provider performance reviews, tracking clinical outcomes,
communicating evidence-based guidelines to the entity’s clinical providers, and other,
similar care delivery efforts; and
Functions other than clinical services that are included in the payment (capitated or
fee-for-service) must be reasonably related or incident to the clinical services, and
must be performed on behalf of the entity or the entity’s providers.

If the entity satisfies this four-part test, payments for clinical services for which the entity bears
the financial risk for utilization as provided in prong two above will be considered incurred
claims. By contrast, payments to third party vendors that only take on pricing risk (e.g.,
payments to pharmacy benefit managers (PBMs) for retail pharmacy claims) should not be
included in incurred claims.
Payments to risk-bearing entities that include payments for administrative functions performed
on behalf of the entity’s member providers are incurred claims if all four factors outlined above
are met.
•

For example, a bundled payment to an IPA or similar entity for providing clinical
services to enrollees which includes: the IPA processing claims payments to its member
providers and submitting claims reports to issuers on behalf of its providers; performing
provider credentialing to determine a provider’s acceptability into the IPA network; and
developing a network for its providers’ benefit, would be included in incurred claims.

To the extent that administrative functions are performed on behalf of the MA organization or
Part D sponsor, however, that portion of the issuer’s payment that is attributable to
administrative functions may not be included in incurred claims. This is the case regardless of
whether payment is made according to a separate, fee-for-service payment schedule or as part of
a global, capitated fee payment for all services provided.
•

For example, payment for processing claims in order to issue explanations of benefits
(EOBs) to enrollees and handling any stage of enrollee appeals would not be included in
incurred claims. Payments for non-clinical services for which the contract between the
IPA and the issuer contains a “clawback” provision are not considered incurred claims
for MLR reporting purposes.

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Commercial MLR
CMS initially modeled Medicare MLR policy after the commercial MLR rules, and only
departed from the commercial MLR rules to the extent necessary and appropriate given the
Medicare context.
Commercial Reinsurance
MA organizations and Part D sponsors may not adjust the MLR for commercial reinsurance.
Commercial reinsurance premiums and recoveries are excluded from the MLR calculation. Both
costs and revenues must be factored into the MLR calculation on a direct basis (i.e., without
taking into account ceded reinsurance) as required under §§ 422.2420(b)(2)(i), 422.2420(c)(1),
423.2420(b)(2)(i), and 423.2420(c)(1).
The only instance in which the premiums (revenue) and claims associated with a 100 percent
indemnity reinsurance treaty are included in the assuming entity’s MLR calculation, instead of
the ceding entity’s MLR calculation, is when the reinsurance treaty was in force prior to the date
of enactment of the Affordable Care Act (i.e., March 23, 2010).
EGWPs
CMS expects EGWPs to include costs and revenue per §§ 422.2420 and 423.2420 for the
Medicare-funded portion of each contract. Although CMS does not currently collect information
on EGWP benefit packages, we have the authority to request this information if needed.
All Medicare-funded revenue must be included.
To determine the Medicare-funded portion of the contract, organizations may either:
•
•

Use actual cost information to separate the employer-funded versus Medicare-funded
portions of the EGWPs under the contract, or
Allocate the Medicare-funded portion of the EGWP costs under the contract based on the
Medicare portion of revenue for the contract (i.e., allocate Medicare-funded costs as the
total costs multiplied by the ratio of Medicare revenue to total revenue).

Note that plan-specific revenue amounts may be useful when allocating costs to yield the most
accurate result. That is, for the purpose of allocating costs, it may be useful to first summarize
the Medicare-funded revenue for the contract separately for EGWP plans under the contract and
for non-EGWP plans under the contract.
Note that all categories of costs (claims, taxes and fees, quality improvement activities, nonclaims costs) need to be separated/allocated between the employer-funded versus Medicarefunded portions of the contract.

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For non-CY EGWPs, we expect that MLR calculations and remittances would occur on a
calendar year basis, similar to how payments and most submissions to CMS are on a calendar
year basis.
Low Income Premium and Cost Sharing Subsidies (LIPS and LICS) and Coverage Gap
Discount Program (CGDP)
CMS makes LIPS payments to MA organizations and Part D sponsors so that they can be made
whole for the reduced premiums paid by eligible low income plan beneficiaries. LIPS payments
are revenue to the plan and are taken into account in the denominator of the MLR. Because
CMS views LICS and coverage gap discount payments as pass-through payments, they are not
part of the numerator or the calculation of the MLR.
MA Optional Supplemental Benefits
The MA MLR includes all of the MA benefits defined at § 422.100(c): basic benefits, mandatory
supplemental benefits, and optional supplemental benefits. All Medicare costs and revenues
under an MA contract should be included in the MLR, and the optional supplemental benefit
package is defined by law as a type of Medicare benefit under the MA program.
Medication Therapy Management (MTM) Programs
MTM programs may be included in the MLR calculation, provided they satisfy the requirements
for quality improving activities as set forth in §§ 422.2430 and 423.2430.
Sequestration
Generally speaking, the MLR calculation is based on actual incurred costs and revenues, which
would reflect sequestration reductions. For example, if reduced amounts are paid to providers
due to sequestration, then incurred costs would reflect the reduction. The revenue received from
CMS would reflect any sequestration reductions.
Territories
CMS is authorized under §§ 422.2420(a) and 423.2420(a) to make adjustments to the MLR
produced by the standard formula to address exceptional circumstances for areas outside the 50
states and the District of Columbia. At this time, CMS does not believe it has sufficient
information to determine whether and how to make such an adjustment. Therefore, CMS will
collect CY 2018 MLR Data Forms and subsequently determine if an adjustment to the CY 2018
MLR calculation is warranted for contracts serving territories. If CMS decides that an
adjustment is warranted, it will announce the methodology to the affected contracts.
Reporting Requirements

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For each contract year, each MA organization or Part D sponsor must submit a Data Form to
CMS, in a timeframe and manner specified by CMS. Per final rule CMS-4182-F, MA
organizations and Part D sponsors will report the MLR percentage (after any credibility
adjustment) and the amount of any remittance owed to CMS for each contract. See §§ 422.2460
and 423.2460.
In accordance with §§ 422.2460(d) and 423.2460(d), the MLR is reported once, and is not
reopened as a result of any payment reconciliation processes.
MLR Review and Non-Compliance
CMS conducts selected reviews of submitted MLR data. See §§ 422.2480 and 423.2480.
MA organizations and Part D sponsors are required to maintain evidence of amounts reported to
CMS and to validate all data necessary to calculate MLRs in accordance with the requirements in
§§ 422.2460 and 423.2460.
Documents and records must be maintained for 10 years from the date such information was
reported to CMS with respect to a given MLR reporting year (for MA organizations, per §
422.2480) or contract year (for Part D sponsors, per § 423.2480).
MA organizations and Part D sponsors must require any third party vendor supplying drug or
medical cost contracting and claim adjudication services to the MA organization or Part D
sponsor to provide all underlying data associated with MLR reporting to that MA organization or
Part D sponsor in a timely manner, when requested by the MA organization or Part D sponsor,
regardless of current contractual limitations, in order to validate the accuracy of MLR reporting.
See §§ 422.2480(c)(2) and 423.2480(c)(2).
Data Forms submitted under § 422.2460 or § 423.2460, calculations, or any other required MLR
submissions found to be materially incorrect or fraudulent—
(1) are noted by CMS;
(2) appropriate remittance amounts are recouped by CMS; and
(3) sanctions may be imposed by CMS as provided in §§ 422.752 and 423.752.
Penalties and Sanctions
An MA organization or Part D sponsor is required to report an MLR for each contract for each
contract year.
If CMS determines for a contract year that an MA organization or Part D sponsor has an MLR
for a contract that is less than 0.85, the MA organization or Part D sponsor has not met the MLR
requirement and must remit to CMS an amount equal to the product of the following:
(1)

the total revenue of the MA or Part D contract for the contract year, per §§
422.2420(c) and 423.2420(c) and
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(2)

the difference between 0.85 and the MLR for the contract year.

If CMS determines that an MA organization or Part D sponsor has an MLR for a contract that is
less than 0.85 for 3 or more consecutive contract years, CMS does not permit the enrollment of
new enrollees under the contract for coverage during the second succeeding contract year.
If CMS determines that an MA organization or Part D sponsor has an MLR for a contract that is
less than 0.85 for 5 consecutive contract years, CMS terminates the contract per § 422.510(b)(1)
and (d) or § 423.509(b)(1) and (d), effective as of the second succeeding contract year.

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CY 2018 MLR DATA FORM
The MLR Data Form captures contract-specific information for the reporting period.
The MLR and remittance must be calculated in accordance with the provisions in §§
422.2420(a) through (c), and 423.2420(a) through (c).
Line 1 – Contract Year
This field is pre-populated with the year to which the contract applies.
Line 2 – Contract Number
Enter the contract number, which begins with a capital letter H, R, S, or E and includes
four Arabic numerals (e.g., H9999). Be sure to include all leading zeroes (e.g., H0001).
Line 3 – Organization Name
Enter the organization’s legal entity name. This information also appears in HPMS.
Line 4 – Date MLR Data Form finalized
This field is populated with the date when the MLR Data Form is finalized. See the
Technical Instructions section for more information.
Line 5 – Contact Information
Plan sponsors must identify two contacts that will be readily available and authorized to
discuss the information submitted in the MLR Data Form.
In this section, enter the name, position, phone number, and e-mail information for both
contacts. Do not leave any part of this section blank.
Line 6 – Adjusted MLR
Non-credible contracts: For each contract that has non-credible experience, as determined
in accordance with §§ 422.2440(d) and 423.2440(d), report that the contract is noncredible. Enter “N/A”
Fully credible and partially credible contracts: For each contract that has fully credible or
partially credible experience, as determined in accordance with §§ 422.2440(d) and
423.2440(d), report the Adjusted MLR for the contract. Enter value as a percentage
(xx.x%).

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The Adjusted MLR should reflect any credibility adjustment applied. CMS defines and
publishes definitions of partial credibility, full credibility, and non-credibility and the
credibility factors through the notice and comment process of publishing the Advance
Notice and Final Rate Announcement.
Line 7 – Remittance Amount
Report the amount of any remittance owed to CMS under §§ 423.2410 and 422.2410.
Enter value as a dollar amount ($x.xx).

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MLR REPORT TEMPLATE USED IN PRIOR YEARS
On April 2, 2018, CMS issued a final rule [CMS-4182-F] that significantly reduced the amount
of MLR data that MA organizations and Part D sponsors submit to CMS on an annual basis.
Under the new rule, MA organizations and Part D sponsors will only report the MLR percentage
(after any credibility adjustment) and the amount of any remittance owed to CMS for each
contract. The final rule also contained policy changes applicable beginning in CY 2019, which
will revise the MLR calculation to include in the MLR numerator all expenditures related to
fraud reduction activities (including fraud prevention, fraud detection, and fraud recovery) and
Medication Therapy Management (MTM) programs. Please note that these policy changes are
not applicable to the MLR calculation for CY 2018.
Prior to CY 2018, CMS released a detailed MLR Report template annually. These MLR Report
files are available in HPMS and also available at https://www.cms.gov/Medicare/MedicareAdvantage/Plan-Payment/MedicalLossRatio.html. Users may wish to continue to use prior
years’ MLR Report templates to assist with MLR calculations and reporting.
The MLR Report template that was used in contract years prior to 2018 contained detailed
categories of revenue and expenses that may be useful to consider when calculating and
reporting MLR. These categories appeared on the MLR Report template Worksheet 1, and are
described below in some detail.
Revenue
In accordance with §§ 422.2420(c)(3) and 423.2420(c)(3), the following amounts must
not be included in total revenue:
• The amount of unpaid premiums for which the MA organization or Part D
sponsor can demonstrate to CMS that it made a reasonable effort to collect.
• The following EHR payments and adjustments:
o EHR incentive payments for meaningful use of certified electronic health
record technology by qualifying MAOs, MA EPs, and MA-affiliated
eligible hospitals that are administered under 42 CFR part 495 subpart C.
o EHR payment adjustments for a failure to meet meaningful use
requirements that are administered under 42 CFR part 495 subpart C.
• Coverage Gap Discount Program payments under § 423.2320.
LICS payments are not included as revenue for MLR reporting.
Total revenue (as defined at §§ 422.2420(c) and 423.2420(c)) for policies issued by an
MA organization or Part D sponsor and later assumed by another entity must be reported
by the assuming entity for the entire MLR reporting year during which the policies were
assumed and no revenue under this part for that contract year must be reported by the
ceding MA organization or Part D sponsor. See §§ 422.2420(c)(4) and 423.2420(c)(4).
Total revenue (as defined at §§ 422.2420(c) and 423.2420(c)) that is reinsured for a block
of business that was subject to indemnity reinsurance and administrative agreements
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effective prior to March 23, 2010, for which the assuming entity is responsible for 100%
of the ceding entity’s financial risk and takes on all of the administration of the block,
must be reported by the assuming issuer and must not be reported by the ceding issuer.
See §§ 422.2420(c)(5) and 423.2420(c)(5).
CMS provides organizations and sponsors with revenue information via several reports. Below is
a mapping of CMS reports to the revenue categories of the MLR Report template. The following
CMS reports are used in this mapping:
•

•

MMDDF = Monthly Membership Detail Data Files
Payments for CY 2018, which would include CY 2018 payment adjustments generally
through the last completed quarter prior to MLR reporting (generally through September
30, 2019) and would include payment adjustments for CY 2018 risk adjustment
reconciliations which appear in the MMR under adjustment reason code 25 for Part C and
code 37 for Part D.
For CY 2018, risk adjustment reconciliation payment adjustments occurred in the May
2019 plan payment.
After the May 2019 plan payment, MA plans reported to CMS that there were instances
where HCCs for some diagnosis codes reported on the MAO-004 report were excluded
from risk scores calculated at that time. In response to these inquiries, CMS researched
the issue and confirmed that there were instances where diagnoses submitted on accepted
linked and unlinked chart review records and reported as allowed (‘A’) and add (‘A’) on
the MAO-004 report were erroneously excluded from risk score calculations to date.
Note that the MAO-004 reported these diagnoses correctly. As such, all diagnoses from
chart review records identified as allowed and added should be included in the encounter
data-based risk score, as long as these diagnoses have not been replaced or voided. Plans
must take this issue into account for CY 2018 MLR reporting, which may involve
additional/amending risk adjustment reconciliation payment adjustments for CY 2018
(per MMR adjustment reason code 25 and 37).
PRS CTR = Payment Reconciliation System (PRS) Reconciliation Results Report to
Plans, Contract Trailer “CTR” version
MLR Report template field
Sequestration Adjustments: MA and PD
Beneficiary Premiums: MA and PD
MA payment including 3 MA Rebate categories
MA Rebate for Part B
MA Rebate for Part D Basic
MSA Enrollee Deposit
Part D direct subsidy
Part D federal reinsurance
LIPSA
Part D risk corridor payments

CMS revenue report
N/A*
N/A
MMDDF item 65
MMDDF items 59+60
MMDDF item 71
N/A
MMDDF item 73
PRS CTR field 20
MMDDF item 35
PRS CTR field 33

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* Sequestration Adjustments are included on the monthly contract-level Plan Payment Report
(PPR), produced by the Automated Plan Payment System (APPS), on a paid basis. The MLR
Report template contained a default sequestration adjustment calculation as 2% reduction of
certain/applicable revenue lines. The MA organization or Part D sponsor could choose to
override this default calculation with a plan-reported sequestration amount, which is still
expected to be approximately 2% of the revenue lines that are subject to sequestration.
Sequestration adjustment must be a negative amount.
Note that the MMDDF amounts do not reflect the sequestration adjustment. The following
MMDDF amounts are subject to sequestration: MA payment including 3 rebates (MMDDF item
65), Part B Rebate (MMDDF items 59+60), Part D Basic Rebate (MMDDF item 71), and Part D
Direct Subsidy (MMDDF item 73).
Note that Beneficiary premiums, Part D federal reinsurance, LIPSA, and Part D risk corridor
payments are not subject to sequestration.
Note that sequestration applied to MA Rebates, including MA Rebates for Part D Basic Premium
Reduction, are considered Part C payment adjustments (not Part D payment adjustments).
Note that federal reinsurance includes both prospective payments and reconciliation adjustments.
Plan revenue related to the MTM program is included in the MLR denominator.
The MMDDF item numbers referenced above correspond to version 12 of the Plan
Communications User Guide, released February 28, 2018, available at:
https://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-InformationTechnology/mapdhelpdesk/Downloads/PCUG-Appendices-v120-February-28-2018.pdf.
CY 2018 contracts that were terminated, consolidated, or withdrawn are required to submit an
MLR that accounts for revenue, including risk adjustment reconciliation amounts. CMS will
post the Part C and Part D risk adjustment reconciliation amounts for CY 2018 contracts that
terminated, consolidated, or withdrew at: HPMS Home > Risk Adjustment > Risk Adjustment
Reconciliation Amount. These values are from the MMR with adjustment reason code (ARC)
25 and 37. These values are prior to application of sequestration (i.e., “gross” of sequestration).
This information may be used in the development of CY 2018 MLR reporting.
More information about the CMS revenue reports may be found at:
•
•

https://www.cms.gov/Research-Statistics-Data-and-Systems/CMS-InformationTechnology/mapdhelpdesk/Plan_Communications_User_Guide.html.
http://www.csscoperations.com/internet/cssc3.nsf/docsCat/CSSC~CSSC%20Operations~
Prescription%20Drug%20Event~Report%20Layouts?open&expand=1&navmenu=Prescr
iption^Drug^Event||

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In accordance with §§ 422.2460(c) and 423.2460(c), total revenue included as part of the MLR
calculation must be net of all projected reconciliations.
Beneficiary premiums include all premiums by or on behalf of enrollees, all unpaid premium
amounts that an organization could have collected from enrollees minus any premium amounts
that remain unpaid after reasonable collection efforts, and all changes in unearned premium
reserves.
Beneficiary premiums are net of MA rebates (i.e., after application of MA rebates to reduce
premium). Beneficiary premiums include MA Basic, MA Mandatory Supplemental, MA
Optional Supplemental, Part D Basic, and Part D Supplemental.
Claims
Incurred claims for clinical services and prescription drug costs must include the
following:
1. Direct claims that the MA organization pays to providers (including under
capitation contracts with physicians) for covered services (described at §
422.2420(a)(2)) provided to all enrollees under the contract.
2. Direct drug costs that are actually paid (as defined in § 423.308) by the Part D
sponsor.
3. For an MA contract that includes MA–PD plans (described at § 422.2420(a)(2)),
drug costs provided to all enrollees under the contract, as defined at §
423.2420(b)(2)(i).
4. Unpaid claims reserves for the current contract year, including claims reported in
the process of adjustment.
5. Percentage withholds from payments made to contracted providers.
6. Incurred but not reported claims based on past experience, and modified to reflect
current conditions such as changes in exposure, claim frequency or severity.
7. Changes in other claims-related reserves.
8. Claims that are recoverable for anticipated coordination of benefits.
9. Claims payments recoveries received as a result of subrogation.
10. Reserves for contingent benefits and the medical or Part D claim portion of
lawsuits.
11. The amount of incentive and bonus payments made to providers.
12. Claims payments recoveries as a result of fraud reduction efforts, not to exceed
the amount of fraud reduction expenses. (applicable for CY2018 MLR)

Part D federal reinsurance is included in both the MLR numerator and denominator.
LICS and CGDP are excluded from both the MLR numerator and denominator.

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MA Rebate for Part B premium reduction and MSA Enrollee Deposit are included in
both the MLR numerator and denominator.
Adjustments that must be deducted from incurred claims include overpayment recoveries
received from providers.
The following amounts must not be included in incurred claims:
1. Non-claims costs, as defined in §§ 422.2401 and 423.2401, which include the
following:
a. Amounts paid to third party vendors for secondary network savings.
b. Amounts paid to third party vendors for any of the following:
i. Network development.
ii. Administrative fees.
iii. Claims processing.
iv. Utilization management.
c. Amounts paid, including amounts paid to a provider or pharmacy, for
professional or administrative services that do not represent compensation
or reimbursement for covered services provided to an enrollee, such as the
following:
i. Medical record copying costs.
ii. Attorneys’ fees.
iii. Subrogation vendor fees.
iv. Bona fide service fees.
v. Compensation to any of the following:
1. Paraprofessionals.
2. Janitors.
3. Quality assurance analysts.
4. Administrative supervisors.
5. Secretaries to medical personnel.
6. Medical record clerks.
2. Amounts paid to CMS as a remittance under § 422.2410(b) or § 423.2410(b).
Incurred claims under this part for policies issued by one MA organization or Part D
sponsor and later assumed by another entity must be included in the MLR calculation of
the assuming organization for the entire MLR reporting year during which the policies
were assumed and no incurred claims under this part for that contract year must be
included in the MLR calculation by the ceding MA organization or Part D sponsor.
Reinsured incurred claims for a block of business that was subject to indemnity
reinsurance and administrative agreements effective before March 23, 2010, for which
the assuming entity is responsible for 100 percent of the ceding entity’s financial risk and
takes on all of the administration of the block, must be included in the assuming issuer’s
MLR calculation and must not be included in the ceding issuer’s MLR calculation.

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Claim experience should generally be through September 30th following the contract year
(examples; claims incurred during CY 2018 paid through 9/30/2019; liability and reserves for
claims incurred during CY 2018 calculated as of 9/30/2019).
Federal and State Taxes and Licensing or Regulatory Fees
Federal and State taxes and assessments and licensing or regulatory fees must be in
accordance with the provisions in §§ 422.2420(c)(2) and 423.2420(c)(2).
Total net taxes/fees should not be negative unless total net taxes/fees increase the
sponsor’s revenue.
In accordance with the provisions in §§ 422.2420(c)(2)(iv)(B) and 423.2420(c)(2)(iv)(B),
the MLR regulations allow a federal income tax-exempt MA organization or Part D
sponsor to include community benefit expenditures up to the limit of either 3 percent of
revenue or the highest premium tax rate in the state for which the MA organization or
Part D sponsor is licensed multiplied by the revenue for the contract.
Health Care Quality Improvement (QI) Expenses Incurred
The regulations at §§ 422.2430(a) and 423.2430(a) define the expenditures and activities
that improve health care quality and can therefore be reported for MLR purposes.
Sections 422.2430(b) and 423.2430(b) identify the excluded expenditures and activities
that must not be reported.
In accordance with the provisions in §§ 422.2430 and 423.2430, expenditures that must
not be included in quality improving activities include ICD–10 implementation costs in
excess of 0.3 percent of total revenue.
Non-Claims Costs
Non-claims costs, as defined in §§ 422.2401 and 423.2401, are those expenses for
administrative services that are not—
1. Incurred claims (as provided in §§ 422.2420(b)(2) through (4) and
423.2420(b)(2) through (b)(4));
2. Expenditures on quality improving activities (as provided in §§ 422.2430 and
423.2430);
3. Licensing and regulatory fees (as provided in §§ 422.2420(c)(2)(i) and
423.2420(c)(2)(i));
4. State and Federal taxes and assessments (as provided in §§ 422.2420(c)(2)(ii)
and (iii), and 423.2420(c)(2)(ii) and (iii)).
Member Months

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Member months should be on a consistent basis with the claims and revenue information
(e.g., include adjustments generally through September 30, 2019).
Member months for a contract year equal the sum across the 12 months of a year of the
total number of enrollees for each month. This includes enrollees who are in ESRD and
hospice status for a month.
CMS defines and publishes definitions of partial credibility, full credibility, and noncredibility and the credibility factors through the notice and comment process of
publishing the Advance Notice and Final Rate Announcement.
MLR and Remittance Calculations (appeared on MLR Report template Worksheet 2)
MLR Numerator = Claims categories plus Quality Improvement Activities categories
MLR Denominator = Revenue categories minus Taxes & Fees categories
Unadjusted MLR = MLR Numerator divided by MLR Denominator
Credibility Adjustment = a percentage calculated based on contract member months and
the published CMS credibility tables for the contract year (either the MA or PD
credibility table)
Adjusted MLR = Unadjusted MLR plus Credibility Adjustment
Medicare MLR Standard = 85.0%
Remittance = (Medicare MLR Standard minus Adjusted MLR) times MLR Denominator
for partially-credible and fully credible contracts with Adjusted MLR less than the
Medicare MLR Standard

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ATTESTATION
An attestation must be submitted in the HPMS attestation module to accompany each MLR Data
Form uploaded to HPMS. The attesting officer must be designated as a CEO, CFO, or COO in
the HPMS Basic Contract Management Module.
The language below is used in the electronic attestation module in HPMS:
CY 2018 MLR Attestation
The officer of this reporting issuer being duly sworn, attests that he/she is the described
officer of the reporting issuer, and that this MLR Data Form is a full and true statement of
all the elements related to the health insurance coverage issued for the MLR reporting
year stated above, and that the MLR Data Form has been completed in accordance with
the Department of Health and Human Services reporting instructions and regulations,
according to the best of his/her information, knowledge and belief. Furthermore, the
scope of this attestation by the described officer includes any related electronic filings
and postings for the MLR reporting year stated above, that are required by Department of
Health and Human Services under implementing regulations.
CEO/CFO/COO

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TECHNICAL INSTRUCTIONS
The MLR Data Form is an Excel workbook that contains macro code and validation logic. The
workbook provides the visual interface for the user to enter MLR data for a contract.
For contract years prior to CY 2018, a separate add-in file (MLRyyyy.xlam) was required to be
saved under C:\MLR\MLRyyyy. The functionalities/macros of the previous add-in file have
now been incorporated into the MLR Data Form workbook.
Workbook Versions
The MLR Data Form employs three versions of the workbook that serve different purposes:
•

Working file – a read-write enabled file that allows users to enter data in specified input
fields. Users may edit, save, name, and re-name working versions of the MLR
workbook.

•

Finalized file – a read-only file created by a process called finalization, which modifies
the format of the working file to prepare it for submission to CMS. Finalization saves the
file using a standard naming convention and populates a “timestamp” within the finalized
MLR Data Form. Note that finalized files remove the macro functionality.

•

Backup file – also a read-only file created by the finalization process. The backup file
uses the same file name as the finalized file with the word “backup” and a timestamp
appended to it. The data in the backup file is the same as that in the working file. Users
can remove the text “backup” from the filename to enable editing of the backup file. As
such, backup files enable users to convert backup files back into working files—if
needed—for further modification.

Workbook Formatting and Protection
Data entry cells are formatted in yellow. Keyboard users may use the ‘Tab’ key on the keyboard
to cycle through the input cells.
All other cells prevent the user from keying in data. A dialog box alerts the user if the user has
selected a protected cell. Cutting and pasting are not recommended, to prevent structural
changes to the workbook. Users may copy and paste data into the workbook, and link the
workbook to external files.
The MLR Data Form is password protected. The user may not modify the structure of the
workbook. Each data item must be located in its pre-defined cell location for successful
processing in the HPMS.
Tampering with the file’s protection, including but not limited to un-protecting and re-protecting
any parts of a workbook, will permanently compromise the file and prevent successful
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finalization of the workbook. If a workbook is compromised in this way, you must discard the
compromised file, download and complete a new MLR Data Form.
Workbook Macros
The workbook includes macros that assist the user with data entry, data validation, and
workbook finalization.
Finalize MLR
The finalization macro prepares the workbook for submission to CMS. The workbook must be
finalized before uploading to HPMS. When the finalization macro is triggered, the following
actions are performed:
•
•
•
•
•

Checks any required fields (ex: Contract Number, Organization Name, and Contact
information) that must be entered for finalization to be successful.
Checks any critical validations of data fields.
Saves the working file.
Creates a backup file – this is a read-only file that contains the same data as the working
file; it can be used to restore data in a working file.
Creates a finalized file with a date stamp within the worksheet.

Finalized MLR workbooks are saved using the following naming convention: Contract
Number+MLR-CY+yyyy.xlsx. Use of this convention is a requirement for a successful upload
to the HPMS.
Example: H1111MLR-CY2018.xlsx
Finalized files are saved in the same directory where the working file is located.
Backup files use the same naming convention as finalized files with a timestamp appended to the
end of the name: finalized filename +“_Backup_”+YYYY-MM-DD-HHmmss.xlsm.
Example: H1111MLR-CY2018_Backup_2019-11-15-100000.xlsm
Back up files are saved in the same directory where the working file is located.
If additional changes are needed prior to submission (i.e., prior to upload to HPMS), modify the
contents of the working file and finalize the file again. The previous finalized file will be
overwritten and a new backup file will be created (backup files will not be overwritten as they
are time-stamped).

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In the instance that the working copy has become corrupted, the backup file may be renamed and
used as the working copy. Removing the word ‘backup’ from the filename of the backup file
will convert the file into a working copy that is read-write enabled.
The workbook contains a button that can be used to launch the Finalize macro.
Circle Invalid
This macro function displays red circles around cells that have failed validation. The validations
are updated each time the file is saved, and when the “Circle Invalid” macro is run.
For example, the MLR workbook cannot be finalized if it contains invalid characters. The
invalid characters are < > & { } ;

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