Summary of HHS' Final Regulation on MLRs

December 5, 2011

On Friday, December 2, HHS released the final rule on MLRs, effective January 1, 2012.

MLRs, or “Medical Loss Ratios,” are the amount of premium revenues a health plan spends on health care. ACA requires MLRs of 80% and 85% and the small and large group markets starting on January 1, 2011. Insurers that fail to meet MLR standards must provide rebates to their customers. Current MLRs in California are as low as 60-70%. Premium dollars not spend on health care are typically designated for administrative overhead and profit.

HHS published an interim final rule with a 60-day public comment period on December 1, 2010. The final rule reflects feedback from approximately 90 comments, including rules regarding mini-med and expatriate policies, fraud reduction expenses, rules regarding accounting for IDC-conversion costs, community benefit expenditures, and rules regarding the distribution of rebates in group markets. The following summary provides original regulations from the interim final rule, a summary of stakeholder comments on the regulations, and HHS’s determination for the final rule. Note that HHS is still requesting comments on two regulations (see below).

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