Health Care Reform – Medical Loss Ratio & Rebates

Medical Loss Ratio (MLR)

The Affordable Care Act has created a basic financial measurement to encourage health plans to provide value to enrollees.

Small Companies: Less than 100 employees

• Required medical loss ratio = 80% of premiums. Meaning that 80 cents for every premium dollar is used to pay medical claims and activities specifically designed to improve the quality of care.

Medium – Large Companies: 100 employees or more

• Required medical loss ratio = 85% of premiums. Meaning that 85 cents for every premium dollar is used to pay medical claims and activities specifically designed to improve the quality of care.
• The remaining 20 or 15 cents of each premium dollar would be used to pay for operating costs (overhead, marketing, salaries, commissions).

Rebates

Starting in August 2012, any insurance company that did not meet the medical loss ratio requirement in 2011 must provide rebates to their customers. Such rebates are managed by the Health and Human Services division ensuring protections to benefit plan participants.

Learn more about this provision by visiting: http://www.healthcare.gov/news/factsheets/2010/11/medical-loss-ratio.html