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UnitedHealthcare is facing enrollment restrictions next year in one of its Medicare Advantage health plan contracts, regulators say, because the insurer hasn't been spending a large enough share of revenue on the health care needs of enrollees.

The sanction from the Centers for Medicare and Medicaid Services applies to just one of United's many contracts with the federal government to sell Medicare Advantage health plans.

Minnesota-based UnitedHealthcare, the nation's largest health insurer, said it fell out of compliance because of federal legislation that reduced the insurer's tax liability last year. The sanction applies to a health plan contract for coverage sold in nine states to less than 1% of the company's roughly 6 million Medicare Advantage members.

"CMS imposed enrollment sanctions on a subsidiary of UnitedHealthcare ... because the organization did not meet a Medical Loss Ratio (MLR) of at least 85% for a third consecutive year," the Centers for Medicare and Medicaid Services said.

"This enrollment suspension will be in effect for contract year 2020," the federal agency said. The federal medical loss ratio rule "requires that a percentage of revenue should be used for patient care, rather than for other items as administrative costs or profit," according to the agency.

UnitedHealthcare is one of the nation's largest sellers of Medicare Advantage plans, a newer form of Medicare coverage in which enrollees opt to receive federal health insurance benefits through private managed-care companies. In 2019, roughly one-third of all Medicare beneficiaries are opting for Medicare Advantage coverage, according to the Kaiser Family Foundation, as opposed to receiving benefits through the original Medicare program.

The federal government monitors the share of revenue that providers of Medicare Advantage plans spend on patient-care needs, versus the amount spent on administration and kept as profit. This measure is called the "medical loss ratio," and it's a standard way for regulators and consumers to assess the profitability of health plans.

When a Medicare Advantage plan drops below 85% spending on patient care for three consecutive years, the government can suspend new enrollment in the plan while letting current enrollees maintain the coverage. In a Sept. 11 letter to UnitedHealthcare, the Centers for Medicare and Medicaid Services said the medical loss ratio was 71.3% in 2016, 83.9% in 2017 and 84.1% in 2018 for health plans within the contract that's being sanctioned.

In a response to questions from the Star Tribune, UnitedHealthcare said the ratio last year fell below the requirement -- despite added benefits -- because the company saw a financial boost last year from the federal Tax Cuts and Jobs Act, which was signed into law in late 2017. The company said it subsequently factored the change into its calculations and anticipates achieving a ratio above 85% in 2019.

"While we won't be enrolling new members in [this contract] for 2020, existing members will continue to receive the same level of care and support, including an increase in their coverage and benefits," the insurer said in a statement. "UnitedHealthcare also has additional Medicare Advantage plans available in many of these markets."

"We anticipate that we will achieve the MLR threshold in 2019 for [this contract], which will allow us to resume enrollment in these plans in 2021," UnitedHealthcare said.

The health-plan contract that's being sanctioned primarily provides coverage for people who qualify for benefits from both Medicare and the state-federal Medicaid programs. UnitedHealthcare officials have said these products for "dually eligible" enrollees are an important growth area for the company.

If the medical loss ratio for a Medicare Advantage plan falls below the 85% mark for five years, the government can terminate its contract with the health plan. The Centers for Medicare and Medicaid Services said the regulatory action against UnitedHealthcare marks the first time the agency has suspended enrollment in a Medicare Advantage plan because of noncompliance with the rule.

Business on 10/15/2019

Print Headline: Insurer's health plan faces federal sanction

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