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Quick Summary of HHS’s Final Rule on MLRs

On Friday, HHS released the final rule on MLRs, effective January 1, 2012.

MLRs, or “Medical Loss Ratios,” are the amount of premium revenues a health plan spends on health care. ACA requires MLRs of 80% and 85% and the small and large group markets starting on January 1, 2011. Insurers that fail to meet MLR standards must provide rebates to their customers. Current MLRs in California are as low as 60-70%. Premium dollars not spend on health care are typically designated for administrative overhead, marketing, and profit.

HHS published an interim final rule with a 60-day public comment period on December 1, 2010. The final rule reflects feedback from approximately 90 comments, including rules regarding mini-med and expatriate policies, fraud reduction expenses, rules regarding accounting for IDC-conversion costs, community benefit expenditures, and rules regarding the distribution of rebates in group markets.  This quick summary of the final rule provides original regulations from the interim final rule, a summary of stakeholder comments on the regulations, and HHS’s determination for the final rule.

HHS will be receiving comments on two sections, the treatment of ICD-10 conversion costs and the rebate process, until January 6, 2012.