Medical Loss Ratio (MLR)

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Insurance companies that don’t spend enough $$$ on claims are required to give some of it back.

Overview

Beginning in 2011, the law requires insurance companies in the individual and small group markets to spend at least 80 percent of the premium dollars they collect on medical care and quality improvement activities. Insurance companies in the large group market must spend at least 85 percent of premium dollars on medical care and quality improvement activities.

Insurance companies must report their MLR data to HHS on an annual basis so that residents of every State will have information on the value of health plans offered by different insurance companies in their State. Insurance companies that do not meet the MLR standard will be required to provide rebates to their consumers.

Insurers made the first round of rebates to consumers in 2012. Originally, rebates were required to be paid by August 1st each year, but this date has since been pushed back.

Source: CMS Fact Sheet “Medical Loss Ratio: Getting Your Money’s Worth on Health Insurance”

Regulations and Guidance

Final Rule on Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act
This final rule with comment period revises the regulations implementing medical loss ratio (MLR) requirements for health insurance issuers under the Public Health Service Act in order to address the treatment of “mini-med” and expatriate policies under these regulations for years after 2011; modify the way the regulations treat ICD-10 conversion costs; change the rules on deducting community benefit expenditures; and revise the rules governing the distribution of rebates by issuers in group markets. (12/07/2011)
Technical Release on Fiduciary Requirements for Handling Medical Loss Ratio (MLR) Rebates
Guidance on Rebates for Group Health Plans Paid Pursuant to the Medical Loss Ratio Requirements of the Public Health Service Act (12/02/2011)
Technical Fact Sheet: Draft Notice of Payment and Benefit Parameters
The proposed Payment Notice provides, among other things, details and parameters related to the medical loss ratio (MLR) program. (11/30/2012)
IRS FAQs about Medical Loss Ratio (MLR) Rebates
This page provides information on the federal tax consequences to a health insurance issuer that pays a MLR rebate and an individual policyholder that receives the MLR rebate. Information is also provided on the federal tax consequences to employees when a MLR rebate stems from a group health insurance policy. (These FAQs were last revised on 04/02/2012.)
Potential Estimated Rebates Saved by HHS Determinations on State MLR Adjustment Applications
2011 Issuer MLR Rebate Estimates in States that Applied for an MLR Adjustment (02/16/2012)
Medical Loss Ratio: Getting Your Money’s Worth on Health Insurance
CMS Consumer Fact Sheet about Medical Loss Ratio (11/22/2010)

Videos

HHS Press Conference about Final MLR Rules

Posted 11/22/2010. Titled “Getting Your Money’s Worth on Health Insurance”


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