Risk Strategies Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule – InsuranceNewsNet

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April 6, 2020 Newswires No comments
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Risk Strategies Issues Public Comment on Centers for Medicare & Medicaid Services Proposed Rule

Targeted News Service

WASHINGTON, April 6 -- Matt Smith, executive vice president of Risk Strategies, Minneapolis, Minnesota, has issued a public comment on the Centers for Medicare and Medicaid Services' proposed rule entitled "Medicare and Medicaid Programs: Contract Year 2021 and 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly". The comment was written on April 2, 2020, and posted on April 3, 2020:

* * *

Thank you for the opportunity to provide comments in response to the Notice of Proposed Rulemaking ("NPRM") from the Centers for Medicare & Medicaid Services ("CMS") on Medicare and Medicaid Programs; Contract Year 2021 and 2022 Policy and Technical Changes to the Medicare Advantage Program, Medicare Prescription Drug Benefit Program, Medicaid Program, Medicare Cost Plan Program, and Programs of All-Inclusive Care for the Elderly published on February 18, 2020.

Comments

Risk Strategies is a national firm that primarily provides insurance and reinsurance brokerage services to many organizations, including MA organizations (MAOs).

We are in receipt of the letter provided to CMS by Jon Biasetti of the law firm Locke Lord LLP dated March 27, 2020 and can advise that we concur with the comments set out in that letter relating to the proposed reinsurance rule at 42 CFR Sec. 422.3 (the "Proposed Reinsurance Rule") described in the NPRM and the Proposed Reinsurance Rule's regulation of the use of first dollar proportional reinsurance.

Our own company and the insurance industry welcome the clarifying intent of the Proposed Reinsurance Rule as there has been a great deal of uncertainty that MAOs have operated under regarding the use of quota share reinsurance. Based on our experience with the actuaries of many MAOs, consulting actuaries and reinsurer actuaries, there is indeed general confusion regarding the meaning of the Actuarially Equivalent Condition and how to comply with it considering that quota share (proportional) and excess of loss (non-proportional) reinsurance are very different forms of reinsurance.

We also agree that, with respect to the Pricing Condition, excess of loss reinsurance and quota share reinsurance are priced very differently in the reinsurance marketplace. Generally, pricing for excess of loss reinsurance is based on either a total dollar amount of premium which the reinsurer's actuaries believe is necessary to cover the anticipated loss to the reinsured layer, i.e., the amount of claims over the specific retention outlined within the reinsurance agreement (the total excess reinsurance premium includes risk, expense and profit components). Pricing for quota share reinsurance, on the other hand, is the agreed upon quota share percentage of premiums being ceded to the reinsurer from the first dollar on up in exchange for the reinsurer sharing in all claims at the same quota share percentage and the reinsurer does not have any influence over the first dollar premiums--those premiums are solely determined by the MAOs. For these reasons, we are also concerned that the Proposed Reinsurance Rule, as written, will not remove the legal uncertainty in the use of quota share reinsurance by MAOs and may actually keep some MAOs from making use of quota share reinsurance.

In their letter Locke Lord proposed the following language for CMS' consideration: "through quota share reinsurance on a first dollar proportional basis, where the MA organization and/or an affiliate of the MA organization retains a minimum ten percent (10%) quota share percentage of the risks being transferred." We can confirm, as a reinsurance broker advising MAO's on reinsurance arrangements, that it is a standard market practice that a ceding insurer retains a minimum retention of 10% and purchases quota share reinsurance up to 90%. Were CMS to apply this proposed language as part of the Proposed Reinsurance Rule then we believe that this would remove the uncertainty relating to MAOs' purchase of quota reinsurance while ensuring that MAOs are not transferring all the risk of providing services to enrollees to a third party that is not under contract with CMS.

Sincerely,

Matt Smith

Executive Vice President

E: [email protected]tegies.com

C: 206 359 0465

* * *

The proposed rule can be viewed at: https://www.regulations.gov/document?D=CMS-2020-0010-0002

TARGETED NEWS SERVICE (founded 2004) features non-partisan 'edited journalism' news briefs and information for news organizations, public policy groups and individuals; as well as 'gathered' public policy information, including news releases, reports, speeches. For more information contact MYRON STRUCK, editor, [email protected], Springfield, Virginia; 703/304-1897; https://targetednews.com

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