Medical Loss Ratio Requirements Under the Patient Protection and Affordable Care Act (ACA): Issues for Congress [August 26, 2014]   [open pdf - 480KB]

"The 2010 Patient Protection and Affordable Care Act (ACA, P.L. [Public Law] 111-148) requires certain health insurers to provide consumer rebates if they do not meet a set financial target known as a medical loss ratio (MLR). At its most basic, a MLR measures the share of health care premium dollars spent on medical benefits, as opposed to company expenses such as overhead or profits. For example, if an insurer collects $100,000 in premiums and spends $85,000 on medical care, the MLR is 85%. [...] The Department of Health and Human Services (HHS) issued rules to implement the MLR with input from state insurance commissioners, who are the main regulators of health insurance. The ACA statute and regulations allow companies to include both quality improvements and medical services when calculating total MLR medical spending. Insurers may subtract (i.e., disregard) state and local taxes and some licensing fees from total MLR expenses. The federal ACA requirements differ from many state MLR laws, which generally compare medical claims to premiums. The ACA MLR is now the national minimum standard that must be met by covered health insurers. [...] Lawmakers have raised some concerns about the MLR provisions, including the fact that insurers are not allowed to deduct insurance agent and broker bonuses and commissions from their MLR expenses."

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CRS Report for Congress, R42735
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