You may have heard the term Medical Loss Ratio or seen the acronym MLR and wondered what it was all about. In simple terms, the MLR is a calculation of the percentage of a medical plan premium that is going towards claims payments and the percentage that is going towards administrative costs. Health insurers have used the MLR for years to help them determine if the amount of claims they are paying can be sustained by the premiums they are charging.
When the Affordable Care Act (ACA) came along, the MLR took on new life. The ACA limits the portion of premium dollars that a health insurer may spend on administration, marketing and profits. Under the ACA, insurers are required to spend 80% of the premium on claims and quality improvements for individuals and small employer group plans (employers with 2-50 employees). For large employer group plans (employers with 51 or more employees), insurers are required to spend 85% of the premium on claims and quality improvements. If an insurer is not spending the required percentage on claims and quality improvements, they are not compliant with the ACA. Enter the MLR rebate.
If an insurer finds that it has not spent enough premium dollars on claims and quality improvements, they must rebate the unused portion back to the group or individuals that paid the original premium. If your insurer has to provide a rebate to your group, they will reach out to you directly with more details on the amount of the rebate. This does not happen very often, but when it does it can be a confusing and complex calculation to the group administrator in charge of trying to figure out how much premium should be returned to the plan participants.
If you should happen to receive notice from your carrier that your group will be receiving a MLR rebate check, please reach out to your Account Manager for assistance. We will be happy to help you!