Most importantly, health plans need to have a mechanism to estimate their MLR on a periodic basis (quarterly, monthly) during the course of the year, and a process for analyzing the results and determining where MLR is projected to be below target.
If your health plan's MLR is projected to be below target, there are generally four ways to improve the plan's MLR position:
1. Reduce administrative costs
Plans are looking to apply multiple cost-reduction levers — process transformation and automation, outsourcing, IT delivery improvements, streamlining of controls — across their business functions:
- Enrollment
- Provider contracting
- Broker/agent commissions
- Claims
- Information technology
- Medical management
- Utilization management
2. Reassess the classification of administrative costs
Your MLR position can be adversely affected if health care costs are inaccurately classified as administrative costs.
It is critical for you to scrutinize all costs currently classified as administrative to identify any that can legitimately be reported as health care or quality improvement costs instead.
Doing so will bring a double advantage, reducing the administrative component of MLR while increasing the health care component, thus making it easier for your plan to meet or exceed its MLR requirement.
3. Reinvest savings into your membership's wellness
By reinvesting administrative and medical savings into your membership's wellness, you can further decrease your plan's costs over time and thus continue to enhance your plan's MLR position.
By using advanced analytics to segment populations within your membership, you can create new types of programs with defined metrics. Employing and implementing a robust and integrated data set analytics solution will allow your plan to:
- Create relevant, health-related messaging and interventions targeted at high-risk members
- Invest in innovative delivery channels
Every plan should evaluate its population prior to executing any new or revised programs. While all programs have similarities across the population, the distributions across various disease states may vary significantly.
Expenditures to enhance your membership's wellness should be categorized as ongoing wellness programs and studies.
The programs will evolve over time and become smarter as lessons are learned. The marriage of member data with outcomes and program data will become a strategic asset.
A portfolio management approach should be used when you're managing multiple programs, allowing for real-time reporting on program status.
4. Reduce premiums
One method of directly affecting MLR is to reduce premiums for specific-state segments — large group, small group and individual. These premium adjustments are done as part of renewals, typically in combination with one or more of the expense-related MLR levers.
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