| Description | Rebates relating to Medical Loss Ratio
Health Plan Insurance Issuers must provide their enrollees a rebate if their MLR is less than 85 percent in the large group market or less than 80 percent in the small group market and individual market. This means that issuers must spend at least 85 or 80 percent, respectively, of each premium dollar, as adjusted for taxes and regulatory and licensing fees, on reimbursement for clinical services provided to enrollees and activities that improve health care quality.
Some States may have different minimum MLR standards. In the States that have established under State law a higher MLR standard than that prescribed by HHS, such higher percentage applies to issuers in that State. In States that have established, under State law, a lower MLR standard than that of HHS standard MLR, the higher percentage set by HHS applies to issuers.
For each MLR reporting year, an issuer must rebate to the enrollee the total amount of premium revenue received by the issuer from the enrollee after subtracting Federal and State taxes and licensing and regulatory fees multiplied by the difference between the MLR required and the issuer's calculated MLR
Rebate amount =
Where A = minimum MLR standard for a particular market
B = adjusted State MLR for that market
C = earned premium
D = federal and state taxes
E = licensing and regulatory fees
For example, an issuer must rebate a pro rata portion of premium revenue if it does not meet an 80 percent MLR for the small group market in a State that has not set a higher MLR.
If an issuer has a 75 percent MLR for the coverage it offers in the small group market in a State that has not set a higher MLR, the issuer must rebate 5 percent of the premium paid by or on behalf of the enrollee for the MLR reporting year after subtracting taxes and fees from the premium.
In this example, an enrollee may have paid $2,000 in premiums for the MLR reporting year. If the Federal and State taxes and licensing and regulatory fees that may be excluded from premium revenue are $150 for a premium of $2,000, then the issuer would subtract $150 from premium revenue, for a base of $1,850 in premium. The enrollee would be entitled to a rebate of 5 percent of $1,850, or $92.50.
Formula: [(A - B)*(C - D - E)]
(see dependencies and their labels for measures used in the formula) |
Adjusted Medical Loss Ratio
NONE