The medical loss ratio (MLR) mandate acts as an annual cap on how many premium dollars an insurance company can spend for administrative costs. They are only allowed to spend 20 percent of the total premium dollars on administrative costs and profits for small group and individual plans and 15 percent for the large group market. The rest should be spent on health care or health care quality service improvements. Failure to meet the requirement would mean giving back the “extra income” to plan holders in the form of rebates.
Only those affected plan holders can qualify to get rebates. For example, the insurance company failed to meet the MLR requirements for the small group market; all plan holders in that bracket will get rebates. Rebates can be in the form of checks, refunds on health insurance premiums paid, or discounts on your future premiums.
The MLR requirement of the health care reform law is a good thing for most consumers. This ensures that they will get the high-quality health care that they paid for with premium dollars. This would also stop insurance companies from taking MORE than they should.
However, some critics of the law fear that this will result in insurance companies shutting down or certain health insurance plans being removed from the market because of the MLR requirement. One type of health insurance plan in peril is the high-deductible health insurance plan. This plan is having a hard time meeting the required medical loss ratio. High-deductible plans offer premiums lower than conventional co-pay plans. With the low premiums, usually these plans get low MLRs warranting insurance companies to give rebates.
We will have to see what will happen to high-deductible policies in the coming months. Let us cross our fingers that they don’t get pulled from the market soon because they can really help people save especially when paired with a Health Savings Account. To learn more about how Health Savings Accounts can help you save year after year, check our HSA page at www.colohealth.com/hsa.htm.
Misty Berryman is a Personal Benefits Manager at ColoHealth. Her aim is to help you make smart and informed healthcare coverage decisions that will fit your needs and budget. Read more about Misty on her Bio page.