Finance — Healthcare

Health plans must meet ACA minimum MLR (Medical Loss Ratio) requirements: the vast majority for individual and small group, the vast majority for large group. You calculate MLR per the CMS methodology (which differs from the accounting/financial MLR): adjusting for quality improvement expenses, taxes, fees, risk adjustment transfers, and reinsurance. If your MLR falls below the minimum, you issue rebates. MLR management is a strategic balancing act: too high means insufficient margin; too low triggers rebates and regulatory scrutiny. You forecast MLR monthly, manage medical cost trend (the largest variable), and make tactical decisions (provider payment timing, reserve strengthening) with MLR implications.

For Medicare Advantage plans, risk adjustment revenue can represent the majority of revenue: CMS pays based on the documented health status (HCC (Hierarchical Condition Category) scores) of your membership. You manage the risk adjustment process: ensuring accurate and complete HCC coding from provider encounters, conducting chart reviews and retrospective coding reviews, submitting risk adjustment data to CMS, and managing RADV (Risk Adjustment Data Validation) audit exposure. HCC coding accuracy directly impacts revenue: a missed HCC category can mean $3,000–10,000+ per member per year in lost risk adjustment revenue. But overcoding triggers RADV audit recoveries, False Claims Act exposure, and DOJ enforcement.