How Health Plans Can Furnish Face Masks to Their Members and Adhere to the ACA’s MLR Rebate Rules.

This article provides guidance on how health insurers can use the ACA’s MLR rules, etc., to help their members, stakeholders, and community.

My last article, intended for a broad audience, focused on why payors should perform the valuable public service of furnishing their members with face masks… especially, their high-risk ones. It posited that they may be able to do this with funding from the billions of dollars in excess profits they are realizing as a result of slowed utilization of medical services, due to the pandemic; monies that will otherwise be rebated in the near future under the ACA. (Estimates are that 2020 rebates will be $2 ¾ billion…peanuts vs. the $20 billion in “rebates” that are accruing).

My last article didn’t address whether the cost of providing masks can be funded with monies that will otherwise be rebated. That is, is the cost of masking members a valid MLR expense? This question is addressed here.

Survey Method

As there are no discussions of this topic on the web, I surveyed a group of industry experts who might be called upon to address it, and got responses from eighteen veterans. Ergo, in addition to my two cents, the discussion below contains input from two chief actuaries, eight consulting actuaries, two health care risk management experts, two law/ public health policy professors, two regulatory lawyers, a member of the Society of Actuaries MLR Workgroup and a member of a relevant government agency who prefers to remain anonymous. The opinions expressed are solely those of the respondent and not their employer, affiliated entity or agency.

General Concept / Hypothesis

The popularity of leveraging health insurer industry purchasing power to furnish face masks to members to curb community spread, improve quality and possibly enhance wearer protection — from funds that will otherwise be rebated per the MLR provisions — was, unsurprisingly, largely universal.

Responses included “This is a capital idea; an efficient, cost-effective way to perform a noble task” and “… you’ve made quite a compelling case for the inclusion of face masks within the numerator of the ACA MLR calculation” and “I can see carriers choosing to distribute masks in lieu of dollar rebates”. Virtually every respondent saw some merit in this pursuit.

Two Enabling MLR Regulatory Provisions

There is a general recognition that to include the cost of providing masks in the MLR rebate calculation, one of these two conditions must be met.

I. The Expense Qualifies as an Incurred Medical Claim

Most respondents indicated that it could be difficult to make a case that the cost of furnishing face masks qualifies as an ordinary incurred claim (for MLR purposes), citing the need to overcome these concerns/challenges:

  • Masks would need to be a covered benefit under the member’s health plan to be properly included as an ordinary claim in the MLR formula.
  • The mask may have to be furnished by a medical services provider.
  • Sans a national mandate, masks are unlikely to be medically necessary.
  • Medical care must be primarily to alleviate or prevent a physical/mental disability/illness; not merely something that is just generally beneficial.

Several respondents indicated that, at first glance, these challenges appeared to be daunting. Upon closer consideration however, most agreed that the each of the requirements could be satisfied. Consider the following.


There are a several ways to satisfy the requirement above. One, very simply, involves reconfiguring a plan’s over-the-counter supplemental (pharmacy) benefit (possibly, on a provisional, conditional or limited-time basis).

Aetna is providing its Medicare advantage members with a Caring for You kit having masks. They are being facilitated by a “a one-time liberalization of an Aetna Medicare Advantage member over-the-counter benefit” and basically extending coverage to include the items in its kit, on a one-time basis. As it is sponsoring the entire cost of the kit, many respondents believe Aetna can classify its cost as a claims expense under the MLR formula.

II. The Measure Qualifies as a Quality Improvement Activity

The consensus opinion is that an argument in support of furnishing masks to members (with the cost being included as an expense under the MRL rebate rules) can best be made if they are a part of a quality improvement activity. QIA expenses are payor expenditures for activities intended to:

1. improve health outcomes (increase the likelihood of desired outcomes vs. a baseline) and reduce health disparities among certain populations,

2. prevent readmissions via a comprehensive hospital discharge plan,

3. improve patient safety, reduce medical error/infection/mortality rates or

4. implement, promote, and increase wellness and health activities.


While QIA guidance is evolving, the respondents agreed that if masks are provided as a part of a general wellness initiative, they will likely qualify as an QIA for MLR purposes. Several respondents noted that a valid argument can be made for providing masks under any one of the requirements above; however, most agreed that it would certainly “promote and increase wellness and health activities”. One person opined that “the simple wearing of them is an effective promotion of good health to the outside world.”

Indeed, there are two ways that a mask can do so: as a measure to promote wellness and as a means by which to improve patient safety/health outcomes.

Face Masks as Source Control to Help Curb Community Spread

It is well-known that face masks are an effective way to curb community spread. Cloth masks are authorized by the FDA for use by health care workers for this purpose per an Emergency Use Authorization. Wearing a mask to curb viral spread during a pandemic, by itself, should meet the QIA requirements. In fact, most respondents interpreted these regulations as being clear in this regard: masks provided with the intent of helping to curb the spread of a lethal airborne disease, will surely/likely qualify as a QIA.

Face Masks as a Means of Protection for the Wearer

In addition to acting as source control, face masks can provide barrier and filtration protection for the wearer, at various levels. In fact, some masks use safe and effective electrostatic air filters and chemical antimicrobial agents that enable the mask to not just curb viral spread but also provide the wearer with a material degree protection (a “feature” in growing demand). It was generally agreed, that a mask that is furnished with the intent (or added benefit) of providing a material degree of wearer protection (and one that is actually able to do so), will likely qualify as a quality improvement activity.

Practical Implications and Challenges

In practice, for MLR calculation/reporting purposes, payors must be certain to properly document their transactions to satisfy CMS requirements.

  • Face mask costs (for use in an ordinary incurred claim calculation) must be coded in a form acceptable to CMS, for each masked individual. This will require proper accounting and tracking by the health plan (e.g. to ensure that the expense is allocated to the right plan, time period, etc.).
  • To properly document mask expenses as a QIA for MLR reporting, each expense associated with the activity must comply with accounting rules related to counting, allocation, and attribution to proper time periods.
  • Expenses associated with furnishing Medicare Advantage members with masks should not be included as an expense in the carrier’s reporting for lines of business subject to the regulation at 45 CFR Part 158.
  • With proper packaging/instructions, there us likely no need for a medical professional in the delivery of an unfitted face mask. That said, medical providers enlisted to help distribute face masks to members.

None of these (largely administrative) challenges will be difficult to satisfy.

Call to Action: Three Ways for Carriers to Furnish Face Masks for Free

There are three ways for payors ─ subject to the MLR rebate provisions or not ─ to create corporate goodwill by leveraging their procurement expertise and purchasing power to provide a regular supply of effective, high-quality face masks to their members (to stretch both payor and member dollars).

  • Expand the benefit plan to include face masks as a covered expense (with specific limitations and conditions). Implement the benefit change; identify, purchase and distribute the face masks (being cognizant of the proper accounting and administration requirements); and include the expense in the MLR rebate calculation as an ordinary incurred claim.
  • Include face masks as a part of a quality improvement activity or initiative. There are many ways to accomplish this within CMS parameters. Done correctly, a payor can feel confident about including some, or all, of the expense in the MLR rebate calculation as an ordinary incurred claim.
  • Expand the OTC benefit to enable members to buy masks at a discount. At the very least, payors should feel compelled to leverage their purchasing expertise/power to ensure their members have an opportunity to buy an ongoing supply of high-quality masks at wholesale pricing. This alone would help members become better protected and stretch their OTC benefit dollars. It benefits the community at large and has the potential to generate considerable goodwill for the payor… at virtually no cost. It is simply an efficient, cost-effective way to do something good.

Dollars vs. Essential Items: an Important Distinction

Rebates are often seen as an overpayment return, the correction of an overcharge. Payors may wish to replace some of their rebate dollars with a regular supply of what is now an essential household item: a face mask. An item that has immediate, measurable and recurring value; that is regularly bought, at retail prices, with out-of-pocket member funds (up to $300/yr).

Many members prefer being provided with essential OTC items rather than the equivalent in cash (e.g., members appreciate $100 worth of essential, high-value masks vs. a marginal $30 rebate increase). The expansion of OTC benefits in the MA market has increased dramatically owing to recent regulatory changes. They are immensely popular with seniors: some 60 million Americans spend some $300+ annually on OTC purchases. OTC benefits range from $150/year to $250/month and are have become both a genuine point of product distinction and an enrollment driver.


We, in the US, have not yet fully experienced a bout of COVID-19 during the flu season or winter; but we are about to, and things could worsen. Mask wearing is the one measure that can help curb viral spread, reduce the wearer’s risk of contracting the disease, and inhibit exposure to bio-burden contamination (depending upon the mask’s design and features).

In these challenging times, any savings is helpful, especially for those on a fixed income. Buying masks have now become an essential, regular house-hold undertaking. They can be expensive however, and many are not savvy enough to make an informed mask purchase decision. Payors can help.

Leveraging their purchasing expertise and market power, payors can ensure that their members have access to a regular supply of affordable, top quality masks. This is a genuine win-win for the payor, member, and community.

Humana appears to understand this. Apart from its multi-million mask Medicare Advantage mail campaign, it’s leveraging its buying power for the good by teaming up with a supplier to offer its members access to (often) Humana-branded face masks, sanitizers and other PPE at wholesale prices.

Hopefully, with a clearer understanding of how the cost of providing their covered populations with face masks can be funded with MLR rebate dollars (or otherwise), more payors will develop programs intended to mask their members. By all accounts, it simply cannot happen fast enough.

Richard Nicholas, a forty-year veteran of the healthcare industry, innovator, author and newly minted social entrepreneur, holds a BA with distinction from Boston College and an MBA from Duke University’s Graduate School of Business. He is the Founder of the TPA Network Research Consortium, an emerging industry-wide research initiative purpose-built to help health plan sponsors evaluate new medical technologies and health innovations.

At 75 pages, our study — COVID-19, Its Transmission and Face Mask Efficacy — is the most extensive of its type. Based on it, and research studies conducted by Stanford Medicine*, the University of Chicago* and the Argonne National Laboratory*, we leveraged science and technology to develop a new type of reusable fabric face mask that is intended, designed and purpose-built to provide the wearer with a meaningful degree of added protection and to inhibit dangerous bio-burden contamination. Patent-pending, it is proudly made in the United States from all-natural, eco-friendly materials. It features both an effective triboelectric air filter and fabrics made with a DTSACl-based QAC chemical antimicrobial. It is enormously comfortable and breathable and can be safely worn for 90 days at a (wholesale) cost of about a dime a day.

To read or download a copy of the face mask study, or to learn more about the Stay Safer PRN95+ Protective Face Mask and the Research Consortium, see or simply click here.

* The Research Consortium has no relationship with these institutions. References to their research is not intended to imply any form of endorsement of the Research Consortium or the Stay Safer product.