The MLR – Medical Loss Ratio Rule requires Insurance Companies to at least spend 80 percent of premium dollars on medical services – claims, over all, not on each policy holder. If they don’t, they have to give refunds – rebates. (health care.gov) Thus, a higher premium plan MUST pay more in claims, a lower premium plan, can cut claims… by decreasing benefits such as, deductibles, co-pays, limiting the number of doctors you can see – narrow networks, metal levels and limited Rx formularies.
AHIP Graph of Medical Loss Ratio 80% Claims – 20% Operating Costs & Profit
President Obama Video – Skip to 7 minutes on MLR 1984? Link doesn’t work
Medi-Cal data shows that 1% of patients account for 23% of spending and 10% account for 63% of total costs. One person has a $2m/month claim. LA Times 7.17.2017
Return of Excess Premium
Blue Shield – Employer Rebates 11.1.2016 CA Health Line
The LA Times reports on 8.5.2015 that Blue Shield (talking points) will pay out $83 million for 2014 an average of $136/policy holder and $21 million to 19,000 small employers, about $1,000.
Health Net 2014 results – no rebates
CA Companies appear to have fine tuned their premiums and claims to meet the MLR Rule and do not have to refund any money for 2013 (Word & Brown Survey) Learn More in Blue Cross Presentation.
Rebates were expected to be 1.3 Billion in 2012!LATimes 4.27.2012 The Hill 5.2014 $332 Million in 2013 – as companies are fine tuning their rates to comply with the rule. Modern Health Care United Health Care has announced a $3,500,000 refund to CA Small Biz. Blue Cross, Blue Shield & Kaiser $50 million LA Times 6.2.2012 Nor, no one can say that Insurance is a Scam, it’s simply a mechanism to share the losses. If you want to pay less premium and are willing to take more of the risk yourself, avoid the 20% “handling charge,” take the Bronze Plan, where you pay 40% of the essential covered benefits. Click here for more info from United Health Care
Blue Shield is voluntarily limiting net income to 2% and giving refunds.
General highlights of the regulations include:
- Rate Increases must be certified by an Actuary CA SB 1163 New Ballot Measure Prop 45 requires Deparment of Insurance Approval
- MLR (Medical Loss Ratio)rebates will be sent to policy holders,which include employers or employee organizations as well as individual plan policyholders.
- Insurers may distribute rebates to employers; in turn, employers would need to issue rebates to employees, based on employee contributions.
- Policyholders are potentially eligible for a rebate determined on a “block” basis. The “block”is defined by:
- Organization size (individual; small or large employer group)
- Legal entity issuing coverage
- State of issuance
- Limited medical and expatriate international plans handled separately
- Small group is defined as 2-50 employees unless a state defines it differently until at least 2016.
- For the 2011 reporting year, issuers of limited medical (mini-med) and expatriate international plans are subject to separate calculation rules.
- The plan’s numerator of the total claims incurred and expenditures for activities that improve health care quality would be multiplied by two.
- Carriers will be required to complete additional quarterly reporting through 2011.
- After reviewing this additional reporting, these adjustments will be revisited by the Secretary for 2012 and beyond.
- Broker commissions will be included in the MLR calculation.
- Non-U.S. insurance companies do not file MLR.
A preliminary analysis of the regulation and the data from this survey support four key points:
- Initial compliance costs (especially accounting, auditing, and contracts with providers and employers) will likely exceed the estimates that accompanied the regulation by a substantial amount for many health plans.
- Plans serving the individual and small-group markets are the most likely to be affected.
- There is no guarantee that the federal MLR rule will lower health costs and premiums. In fact, the incentives under the rule may lead to higher administrative costs, higher-cost benefits, and higher premiums.
- The rule could reduce the number of health plans competing in some markets. ahip hi wire.org Like Aetna and PacifiCare leaving the CA Individual Market
The rate review regulation process
Insure Me Kevin.com – How are premiums determined 3.9.2017
Blue Shield FAQ’s
Government Tool to find out about Rate Increases or Loss Ratio for each Insurance Company
CIGNA’s informed on reform.com
Blue Cross Memo on MLR – Medical Loss Ratio’s 12/3/2010
Section 2718 900 pages
- CA Rate Regulation
- CFR Code of Federal Regulations – MLR