Dive Brief:
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As part of his $168.2 billion executive budget, New York Gov. Andrew Cuomo is proposing to cut Medicaid payments to payers with large reserves, Politico reported.
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The proposal from the Democrat would allow the state health commissioner to cut Medicaid rates to insurers with large reserves that offer Medicaid managed care or long-term care.
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Cuomo is also proposing a 14% tax on for-profit payers and calling for the state to get “a cut of the proceeds when nonprofit insurers convert to for-profit companies.” Cuomo expects to raise $500 million annually over the next four years on that proposal alone.
Dive Insight:
Cuomo’s proposal lacks specifics, but it’s already raising alarms with payers, which are required to spend a minimum amount of premiums dollars on direct patient care.
The Affordable Care Act's medical loss ratio (MLR) rule requires most payers that cover individuals and small businesses to spend at least 80% of their premiums on claims and quality improvement. For large businesses, the number is at least 85%. A Medicaid managed care rule put into place in 2017 also required Medicaid managed care plans to have an MLR of at least 85%.
The remaining money can go to administrative costs, such as marketing, profit or put into reserves. Even before the ACA, many states already had requirements pertaining to MLR, but they varied widely.
Despite those regulations, some leaders, such as Cuomo, are still concerned about payers building up reserves and profits from member premiums.
It’s not only Democrats either. Then-New Jersey Gov. Chris Christie, a Republican, asked Horizon Blue Cross Blue Shield of New Jersey last year to deposit $300 million in profits to a state addiction-treatment fund.
At the time, Christie also proposed the state’s Department of Banking and Insurance have more control over Horizon’s finances, add state-appointed members to the company’s board and require the company disclose executive and lobbyist salaries and bonuses.