HHS Announces Rules Defining Medical Loss Ratios

by Stacey Larson on December 8, 2010

On November 22, Secretary Kathleen Sebelius of the Department of Health and Human Services (HHS) announced new rules that will define how much of consumers’ premiums insurance companies must spend on healthcare services.

The term “medical loss ratio” (MLR) describes the percentage of premiums that goes directly to paying for healthcare services – as opposed to supporting administrative overhead or profits. The Affordable Care Act (ACA) included a “medical loss ratio provision” aimed at helping consumers get good value for their health insurance premiums by instituting limits on how low the medical loss ratio can be. The ACA also requires insurance companies that do not conform to these requirements to issue rebate checks to consumers for the portion of the premium that should have been spent on patient care and was not.

The new rules, which were drafted by the National Association of Insurance Commissioners and officially issued by HHS this week, require that insurance companies spend at least 80-85% (depending on size of plan) of their premium dollars on medical care and health care quality improvements rather than administrative fees, executive salaries and marketing. The regulations outline insurer reporting requirements and how to calculate MLRs as well as a timing schedule for reports to HHS and rebates for consumers. The rules will go into effect on January 1, 2011.

More information about medical loss ratios is available here. The regulation and other technical information are available here.

share this article on your social site
  • Facebook
  • Google Bookmarks
  • Twitter
  • del.icio.us
  • Technorati
  • Digg
  • StumbleUpon
  • LinkedIn
  • Live
  • Reddit
  • Slashdot
  • Tumblr
  • Yahoo! Bookmarks

Previous post:

Next post: