On Tuesday, CMS unveiled nearly 700 pages of rules that will impact millions of Medicaid and CHIP beneficiaries currently enrolled in managed care organizations, as well as health care providers, insurers, and state agencies. The federal regulations have not been updated since 2002.

In the first major overhaul in over a decade, the U.S. has proposed new rules for private health insurers who run Medicaid plans covering millions of poor people and children. The proposed rules call for plans to report what portion of the money they collect to care for patients actually gets spent on benefits. They will also attempt to broaden access to doctors and hospitals by having states set standards on access to care, as well as create a performance-based rating system for plans.

One proposal would require plans to assume, for rate-setting purposes, that they will spend at least 85 percent of their revenue on medical care. This “medical-loss ratio” target is similar to that required under the health law for other plans, except that under this rule, Medicaid plans would not have to rebate the difference if they spend less than 85 percent. Health care companies have not been looking forward to the proposed medical-loss ratio, and with some states already setting their own MLR minimums, key industry players are concerned that a national standard would constrain states’ flexibility.

The proposal also seeks to establish a quality-rating system, perhaps similar to the star scores assigned to Medicare coverage for seniors, so members could compare plan performance. In a victory for the industry, the proposal aims to loosen marketing restrictions on insurers that offer Medicaid coverage as well as plans available through the marketplace.

The rules published Tuesday are only proposals. HHS will take comments through July and issue final rules later.

Kaiser Health News: CMS Releases Regulations to Overhaul Medicaid Managed Care