MLR – Medical Loss Ratio Rule

The MLR – Medical Loss Ratio Rule requires Insurance Companies to  at least spend 80 percent of premium dollars on medical services – claims, over all, not on each policyholder.  If they don’t, they have to give refunds – rebates. * ^CMS.Gov * ^NAIC *  ^{(health care.gov)}       Thus, a higher premium plan MUST pay more in claims, a lower premium plan, can cut claims… by decreasing benefits such as,

• deductibles,
• co-pays,
• limiting the number of doctors you can see – narrow networks,
• metal levels  and
• limited Rx  formularies.
• FYI UHC & Anthem Medicare Advantage Plans in 6 states got suspended for not following the MLR Rule!  ^{Modern Health Care} *
• the medical loss ratio rule, was touted by the Obama administration as a tool for lowering premiums, but in the long run, it may be having the opposite effect.  Modern Health Care 3.14.2020
• Why insurers are cutting broker pay for exchange plans  Adverse selection – Open Enrollments Modern Health Care 4.13.2022
• Risk Adjustment in Medicare Advantage
• California Health Care Foundation MLR Resources

Do your part to keep costs down by

• watching your weight,
• preventative care
• Social Distancing
• Who pays for rioting & looting?
• and wellness programs
• COVID Precautions – Hospitalizations Payments may increase rates!  Vaccinations?  InsureMeKevin.com
  • BROKER ONLY – Warner Pacific
• proposed Office of Health Care Affordability  AP News 3.14.2022

What is #actuarial value and how does it affect premiums?

The actuarial value of a health insurance policy is the percentage of the total covered expenses that the plan covers, on average for a typical population. [Age & Zip Code] For example, a plan with a 70% Silver actuarial value means that consumers would on average pay 30% of the cost of health care expenses through features like deductibles and coinsurance. The amount that each enrollee pays will vary substantially by the amount of services they use.

The health reform law specifies a benchmark level of coverage for the purposes of premium subsidies using actuarial values. Premium subsidies will be tied to Silver plans, which have an actuarial value of 70%. Additional subsidies for people making between 100 and 250% of the poverty level limit cost sharing and raise the actuarial value of Silver plans. Our  calculator also illustrates premiums and subsidies for Bronze plans, which have an actuarial value of 60%. Bronze plans represent the minimum level of coverage most people are required to maintain under health reform, and these plans will have higher cost sharing on average. Regardless of the level of actuarial value, insurers will have to cover a defined set of health care services and cap the total amount of cost sharing required of consumers at defined levels, but can generally otherwise vary the structure and degree of cost sharing so long as minimum actuarial value thresholds are met.

• Graphic Summary of the four metal levels & percent of cost of coverage
• 45 CFR 156.140 Metal Levels of Coverage
• Kaiser Foundation 6 page pdf summary

General highlights of the regulations include:

• Rate Increases must be certified by an Actuary ^{CA SB 1163}   New  Ballot Measure Prop 45  requires Deparment of Insurance Approval
• MLR (Medical Loss Ratio)rebates will be sent to policy holders,which include employers or employee organizations as well as individual plan policyholders.
  • Insurers may distribute rebates to employers; in turn, employers would need to issue rebates to employees, based on employee contributions.
• Policyholders are potentially eligible for a rebate determined on a “block” basis. The “block”is defined by:
  • Organization size (individual; small or large employer group)
  • Legal entity issuing coverage
  • State of issuance
  • Limited medical and expatriate international plans handled separately
• Small group is defined as 2-50 employees unless a state defines it differently until at least 2016.
• For the 2011 reporting year, issuers of limited medical (mini-med) and expatriate international plans are subject to separate calculation rules.
  • The plan’s numerator of the total claims incurred and expenditures for activities that improve health care quality would be multiplied by two.
  • Carriers will be required to complete additional quarterly reporting through 2011.
  • After reviewing this additional reporting, these adjustments will be revisited by the Secretary for 2012 and beyond.
• Broker commissions will be included in the MLR calculation.
• Non-U.S. insurance companies do not file MLR.

A preliminary analysis of the regulation and the data from this survey support four key points:

• Initial compliance costs (especially accounting, auditing, and contracts with providers and employers) will likely exceed the estimates that accompanied the regulation by a substantial amount for many health plans.
• Plans serving the individual and small-group markets are the most likely to be affected.
• There is no guarantee that the federal MLR rule will lower health costs and premiums. In fact, the incentives under the rule may lead to higher administrative costs, higher-cost benefits, and higher premiums.
• The rule could reduce the number of health plans competing in some markets. ^{ahip hi wire.org}   Like Aetna and PacifiCare leaving the CA Individual Market

The rate review  regulation process

Consumer Resources

• CMS.Gov on MLR
• Insure Me Kevin.com – How are premiums determined 3.9.2017
• Patient Protection and Affordable Care Act (PPACA)
• Government Tool to find out about Rate Increases or Loss Ratio for each Insurance Company
• health care.gov FAQ  Value for Premium $$$
• Health Net paid the minimums in 2011 and will not be sending rebates Aetna met minimums in CA
• YouTube Channel
• Blue Cross Memo on MLR – Medical Loss Ratio’s

Child - Subpages 

• CA Insurance Rate Regulation
  • Financial Impact of Health Care Reform on Premiums
  • Premium increases? Why are they always going up?

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