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Minimum Loss Ratios
The MLR requirement varies by market. For individual and small group carriers, 80% of all premium revenue must be spent on health care services and quality improvement. For large group carriers, the MLR increases to 85%. Insurance companies that fail to meet MLR standard will be required to provide rebates to their customers. In cases of an individual policy, this may come as a credit or an actual rebate check. If the premiums were paid by the employer on behalf of the employee, the employer will receive the rebate. Regardless of whether the rebate is provided to enrollees directly or indirectly through their employer, each enrollee must receive a rebate that is proportional to the premium amount paid by that enrollee.
Since the ratio is based on not only actual health care services, but quality initiatives, it is important to understand what falls under this. Under this definition, activities that improve health care outcomes, reduce medical errors and improve patient safety, encourage wellness and prevention, and reduce rehospitalizations are all counted. Related IT expenses as well as the cost of healthcare hotlines also qualify. The cost of collecting and reporting quality data for accreditation purposes, as well as the proportion of accreditation fees attributable to quality improvement activities, are also deemed quality improvement.
Insurance carriers (including grandfathered but not self insured plans) will need to report annually to HHS the following information:
· Total earned premiums;
· Total reimbursement for clinical services;
· Total spending on activities to improve quality; and
· Total spending on all other non-claims costs excluding federal and State taxes and fees.
The annual data is due to HHS by the following June 1. With this deadline, the first time rebates would be payable to covered individuals would be August 2012.