Medical Loss Ratio Rebates - Final Rule Update

HHS is amending the Medical Loss Ratio program, also known as the 80 / 20 rule, to ensure that, beginning in 2014, issuers include premium stabilization amounts in medical loss ratio and rebate calculations. HHS is extending the annual medical loss ratio reporting deadline from June 1 to July 31, and the rebate disbursement deadline from August 1 to September 30 to take into account the premium stabilization programs. This change will allow issuers to accurately calculate their medical loss ratios while ensuring that consumers receive rebates as quickly as possible. HHS is also allowing tax-exempt not-for-profit issuers to deduct community benefit expenditures (subject to caps) and State premium tax from premium in calculating medical loss ratios and rebates. This change promotes a level playing field for issuers within each State.

Medical Loss Ratio Rebates

The Affordable Care Act requires health insurers in the individual and small group markets (2 to 50 employees) to spend at least 80 percent of the premiums they receive on health care services and activities to improve health care quality (in the large group market (51+ employees), this amount is 85 percent). This is referred to as the Medical Loss Ratio (MLR) rule or the 80/20 rule. If a health insurer does not spend at least 80 percent of the premiums it receives on health care services and activities to improve health care quality, the insurer must rebate the difference.