The statistics are enough to keep anyone awake at night: Of the people who purchase their own coverage, HHS estimates that 45% are in plans that don’t meet the minimum MLR, while 9 million people are potentially eligible for rebates at a projected cost of $1.4 billion in 2012 alone.

Clearly, complying with strict MLR mandates -- 85% for large group carriers and 80% for small group and individual carriers -- is a top-of-mind issue for many healthcare executives today. It’s not just because of the estimated financial impact. Many have also come to the realization that their existing processes and systems are ill-equipped to comply with the MLR mandate or efficiently manage the rebate process.

For example, to calculate the MLR, data must be aggregated by state and market over a three-year period. Earned premium adjustments must be made for assessments paid to, or subsidies received from, federal and state high-risk pools, as well as for premiums associated with group conversion charges. Other adjustment must be made for experience rating refunds and unearned premiums.

Incurred claims must be adjusted for such things as group conversion charges, unpaid claims between the prior and current year’s unpaid claims reserves, change in claims incurred but not reported (IBNR), other changes in reserves and any experience rating refunds.

Under the MLR formula, plan activities that improve healthcare quality can be counted with incurred claims. These include case management, care coordination, chronic disease management, accreditation fees directly related to quality of care activities and quality reporting, as well as IT to support these activities. Also acceptable are quality initiatives designed to prevent hospital readmissions, improve patient safety, reduce medical errors and promote wellness and health activities.

It’s a lot to manage on an ongoing basis, particularly when critical systems and processes must first be retooled or, in some cases, built from scratch…at a time when few can afford to make the significant investments required to do so.

Many carriers will find that the solution is to leverage technology-enhanced outsourced solutions that provide a cost-effective "turn-key" approach to MLR management. The right partner will be able to mitigate the risk of failing to meet the MLR and deliver benefits beyond avoiding rebates or the hit on limited profits.

The focus should be on implementing new and efficient administration and sales models to shift expenses and to achieve optimal pricing to avoid going over or under the MLR. It should also be on expanding portfolios to include ancillary products to replace lost revenues.

Most importantly, the focus should be on strategies designed to specifically avoid the MLR threshold. Finally, by outsourcing to a highly experienced partner will equip carriers not only to process rebates if and when required, but to also convert that rebate process from a profit loss to a marketing opportunity.