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Medical Loss Ratio

Timeline of Provisions

Medical Loss Ratio

Summary

Health Plan Reporting Requirement

This provision requires insurers to report plan costs for the purpose of calculating the insurers' medical loss ratio (the percentage of insurance premium dollars spent on reimbursement for clinical services and activities to improve health care quality).

Large group insurers must spend at least 85 percent of premium dollars on claims and activities to improve health care quality. Individual and small group insurers must spend at least 80 percent of premium dollars on claims and activities to improve health care quality.

The calculations will be based on the aggregate experience of the issuer for each state in which the issuer is licensed. Medical cost activities that are grounded in evidence-based medicine and improve health care quality will be included in the calculations. Activities designed primarily to control or contain costs will be considered administrative.

Adjustments will be made for:

  • Prevention of market destabilization
  • Insurers with low volume in a state
  • New plans with over 50 percent of premium in state in the new plan
  • Mini-med and expatriate plans

Rebate Requirement

Beginning Aug. 2012, health plans must provide rebates to policyholders if their medical loss ratio – the percentage of premiums spent on reimbursement for clinical services and activities that improve health care quality – does not meet the minimum standards for a given plan year.

MLR Basics

  • The Medical Loss Ratio provision applies only to fully insured individual and group health insurance business.
  • MLR does not apply to self-funded (ASO) business.
  • In general, MLR is determined for medical products only.
  • MLR does not apply to HIPAA excepted benefits such as stand-alone dental, vision or disability.
  • The MLR calculation is done on an aggregation set of groups and individuals based on the legal insurance entity writing the business, the state of contact issuance and group size as determined by the MLR definition of groups based on the Average Total Number of Employees (ATNE).
  • MLR is not determined by the traditional "block of business" or at the policyholder level.
  • The group size definition relies on determining the ATNE, which includes all full-time, part-time and seasonal employees for a given calendar year.
  • MLR group size does not rely on eligible or enrolled employees.
  • The U.S. Department of Health and Human Services calls for small group size to be defined as 1-100 ATNE employees by no later than 2016, with states having the option to use up to 50 ATNE employees or follow the HHS definition now.
  • MLR small group size is not the UnitedHealthcare definition of 2-99.

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