One person I spoke to recently, Evan Falchuk at Best Doctors, pointed out that the MLR caps take away the incentive for HMOs to keep costs down. Under the current rules if you are adept at either containing costs or pricing well, your MLR falls and it translates into profitability. With government-mandated MLRs, and forced rebates to consumers if you push the MLR down too far, what will be the incentive to keep costs in check?AHIP expresses concern about the MLR reg here. It's very unlikely in the FEHBlog's view that HHS will make changes to this rule that favor HMOs.
The FEHBlog does not expect the rule to have an adverse impact on insured fee for service FEHB plans as explained briefly in Tuesday's Tidbits. The MLR rule does not apply to self funded fee for service FEHB plans.