Insurers Perform Due Diligence Anticipating Medical Loss Ratio Rebates

Posted by BAS - 20 January, 2012

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The Affordable Care Act requires insurers to implement medical loss ratio provisions for their book of business. A minimum medical loss ratio, or MLR, is a requirement that insurers spend at least a specified percentage of employees' premium dollars on clinical care, rather than on administrative expenses such as executive salaries, overhead, marketing and profit. If an insurer does not spend enough on patient care to satisfy the MLR provisions, the insurer must make financial adjustments and provide rebates to customers. Health care reform sets the minimum MLR level at 85 percent for the large group market and 80 percent for the small group market. This means that administrative and other non-clinical costs can be no more than 15 or 20 percent of the insurer's revenue. If an insurer fails to meet these standards, the insurer will be required to provide a rebate to customers beginning this year (2012).

BAS has learned that in anticipation of rebates to customers, insurers are requesting information from group health plans to determine if the plan is a large or small group, and if the group is subject to the Employee Retirement Income Security Act (ERISA). Certain insurers, including Independence Blue Cross, will contact employers by telephone to request plan census information.

For more information about the MLR provisions under health care reform, please contact Marla G. Roshkoff, General Counsel, at PR@BASusa.com.


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