Confused about the Medical Loss Ratio Check a way to improve affordable health insurance in Los Angeles by Barbara Kempen | Aug 9, 2012 | Affordable Health Insurance, Health Insurance Brentwood, Health Insurance Pacific Palisades, Health Insurance Santa Monica Are you still confused about the Medical Loss Ratio ( MLR) Check a good way to find affordable health insurance in Santa Monica. Why do some some insurance policy holders are getting rebates? First, what is the minimum medical loss ratio, or MLR? It’s part of the Affordable Care Act (ACA), also known as health care reform. The MLR requirements set minimum percentages of premium dollars that health plans must spend on health care (medical costs and activities that improve health care quality improvement). Let’s see how it works. To calculate the minimum MLRs,one starts with premiums. Premiums are what employers or group policyholders and individual members pay us for their health insurance. Then the carriers determine how much of the premium dollars are spent on actual health care. The minimum percentage of premium health plans must spend on health care is 85 percent for large groups and 80 percent for small groups and individual policyholders. Some states have higher or lower minimum MLR percentages. The remaining 15 to 20 percent can be spent on other types of expenses, such as customer service, network development and information technology. That 15 to 20 percent also has to cover things like developing new products and preventing fraud, waste and abuse. Large groups are generally companies with more than 50 employees, but that can go up to 100 employees in some states. Second, the insurance carrier need to determine the actual MLRs so they can compare it with the minimum MLR requirements. The actual MLRs are how much they actually spent on health care as a percentage of premiums for the year. The carriers make this actual MLR calculation for each insurance market in a state – large group, small group, and individual and for each legal entity that issues coverage. The carriers place policyholders in these MLR “pools” based on their size, their contract issue state and the legal entity that issued the coverage. Once the carrier know the actual MLR for each pool, they compare it with the 80 or 85 percent minimum MLR requirement for that pool. They do not make a separate MLR calculation for each customer or group. What if an insurer spends less than the minimum amount in a specific MLR pool? It has to pay rebates to policyholders in that pool. Most plans are not getting rebates. If a subscriber or employer is due a rebate, the insurance carrier will send you a notice. It will have details about the rebate. In the individual market, rebate checks will be mailed to the policyholder. In the group markets, in most instances, the insurance carrier are required to issue the rebate check to the employer/policyholder. The insurance carrier expects to mail notices and rebate checks to eligible policyholders by August 1. The federal government set guidelines that group employers/policyholders are required to follow when using rebate dollars. A few important notes: Only insured plans are eligible for rebates. Many large employers fund their own health plans, and the insurance carriers a just administers the plans for them. These are called self-funded plans. They’re not eligible for rebates. Medicare plans aren’t eligible for rebates this year either. We hope this small introduction to the medical loss ratio topic has given you a better understanding. Do not expect a big check, many clients received checks in the $ 2- $ 7.00 range, but with having an oversight on spending it is guaranteed that the insurance carrier try to offer the most affordable health insurance premium in Santa Monica. We can already see a trend that premium are getting less raised so that they in future years less checks have to be mailed to the policy owners. So the MLR has a positive effect on offering affordable health insurance in Santa Monica.