Medical Loss Ratio (MLR) Rebates

April 30, 2012
3 min read

A key provision of the Patient Protection and Affordable Care Act (PPACA) stipulates that insurance carriers must spend a cetain percentage – 85% on large groups and 80% on small or individual groups – of collected premiums on medical care and quality improvement.
Under this provision – which only applies to traditionally-insured health plans and not self-insured policies – if that Medical Loss Ratio (MLR) standard isn’t met, a rebate must be sent to the policyholders, which could include employers, employee organizations, and individual plan policyholders.
MLR Calculations & Requirements for Insurance Carriers
Insurance companies are now required to report MLR data – which includes aggregate premium, claims experience, and quality-improvement expenditures for large-group, small-group and individual markets – to each state in which they do business. The MLR will then be calculated based on their entire business, rather than an individual group health plan’s experience.
Once all the data is calculated, if the 2011 MLR standard falls short of the stipulated standard, rebates must be issued no later than August 1, 2012.
MLR Rebate Rules for Employers and Policyholders
The majority of group policyholders – who are, in most cases, the employers – will be obligated to use a portion of the rebate to benefit individual subscribers. For example, when rebates are paid to a group policy that is governed by ERISA, the policyholder must follow the Department of Labor’s requirements for handling rebates that quality as ‘plan assets’.
However, MLR rebate rules can vary greatly depending upon how your plan is governed, so it’s imperative that you check with your plan documents – and benefits administrator – for individual guidance.
And GSA can help. If you have any questions regarding MLR rebate rules or any other matter, don’t hesitate to contact us at 1-800-250-2741, ext. 170 or via email at
Please note that the information contained on this website is provided as an
informational service to our clients and does not constitute legal advice.

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