MAOs Hope for More Clarity on Quota Share Reinsurance

Under Medicare law, Medicare Advantage organizations must assume full financial risk on a prospective basis for the provision of basic benefits provided to enrollees. But certain exceptions exist that allow MAOs to purchase reinsurance, such as excess of loss reinsurance limiting the primary carrier’s liability in excess of a specified dollar “attachment point.” As MAOs seek permissible reinsurance arrangements to manage new risk associated with the coronavirus (see story, above), plans and their actuaries are hopeful that CMS will provide much-needed clarity around the use of quota share reinsurance in a soon-to-be finalized rule, one industry expert tells AIS Health.

Through a proposed rule issued in February (85 Fed. Reg. 9002, Feb. 18, 2020), CMS sought to codify previous policy changes, extend new flexibilities to MAOs and make some major changes to the MA star quality ratings (RMA 2/20/20, p. 1). The rule also included a provision that would define the purchase of reinsurance in a way that CMS hasn’t before. To remove some legal ambiguity mentioned in previous stakeholder comments, CMS said it planned to implement a new exception and “establish in regulation options to use reinsurance for costs beyond a specified threshold.”

© 2021 MMIT

Lauren Flynn Kelly Managing Editor, Radar on Medicare Advantage

Lauren has been covering health business issues, including drug benefits and specialty pharmacy, for more than a decade. She served as editor of Drug Benefit News (the predecessor to Radar on Drug Benefits) from 2004 to 2005 and again from 2011 to 2016, and now manages Radar on Medicare Advantage. Lauren graduated from Vassar College with a B.A. in English.

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