Novu Health Engagement Blog

How to optimize your Medical Loss Ratio

Ben Wright
For Medicare Advantage plans, the Medical Loss Ratio rule requires plans to spend at least 85% of revenue on services, covered benefits and quality improvement

We optimize the MLR numerator. So can you. Let’s talk about how. 

For Medicare Advantage (MA) plans, one of the most significant influences on expenditures and profit is the Medical Loss Ratio (MLR) rule. This rule requires that MA plans spend at least 85% of their revenue on health care services, covered benefits and quality improvement efforts. Plans that fall below this 85% threshold are dinged financially. If a plan fails to meet the 85% MLR for 3 or more consecutive years, it will see a ban on new enrollment and, after 5 consecutive years, contract termination.

 

Now, in an effort to align rules across health insurance programs, the MLR rule is also coming to Medicaid managed care organizations (MCOs). The long-awaited CMS mega-rule will soon establish Medicaid’s first quality rating system and impose the same 85% MLR rule already in effect for MA plans.

 

For Medicare Advantage plans, the Medical Loss Ratio rule requires plans to spend at least 85% of revenue on services, covered benefits and quality improvement

 

With the MLR rule becoming more widespread across markets, here’s the good news: this regulation works in favor of plans interested in utilizing rewards and incentives programs to improve quality scores and earned premiums, and reduce medical claims. That’s because, with the MLR, marketing costs for rewards and incentives programs fit solidly within quality improvement expenditures (QIE). Those expenditures, as you can see in the visual above, are part of the MLR numerator—meaning they count as part of the 85% MA plans are required to spend on running their plans.

 

Novu, the health care industry’s leading marketing and behavior change platform, is uniquely positioned to impact not just the QIE piece of this equation, but also risk adjustment, consumer experience and improve your brand. Novu’s omni-channel solutions, including rewards and incentives programs, work to drive high-impact activities among members in a more cost-effective, seamless way, helping to reduce claims and keeping plans from falling below the 85% threshold. Plans are also more likely to earn quality bonuses and premiums as Novu drives hard-to-reach members to take action, improving quality measures. In turn, meeting such quality standards will help plans to build credibility as brands, boost retention, and enable market expansion, as desired.

 

To learn more about how Novu can help your MA plan optimize its MLR—or help your Medicaid plan begin strategizing for the future—click below

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Don’t hesitate to contact us with any questions.

 

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