The rule makes a temporary change to the administrative cost ceiling. Currently, as a result of the Medical Loss Ratio (MLR), insurers are allowed to have 20% of their costs be administrative, with the other 80% devoted to claims. That number has been increased to 22% for 2015 under the proposal to accommodate the increased burden issuers have faced in complying with the law and adjusting to the Exchanges. Issuers now have some more resources to devote to administrative costs next year.
The Centers for Medicare & Medicaid Services (CMS) released the proposed rule and other guidance documents late March 14, 2014, in a continued effort to implement the Affordable Care Act (ACA). The rule, is centered on implementation of market reform provisions of the ACA. The change to the risk corridors program was instituted as a way to cushion issuers from excessive gains or losses due to uncertainty surrounding premium rates.