Federal Regulatory Guidance and Actions: Medical Loss Ratio

NCSL Resources

Posted June 2010

CAD flagThis is one in a series of NCSL documents offering assistance to states in interpreting and implementing the Affordable Care Act.

Medical Loss Ratio (MLR)

Title I, Subtitle A, Sec. 1003

Establishes a process for the annual review, beginning with the 2010 plan year, of unreasonable increases in premiums for health insurance coverage. Authorizes the awarding of grants to states beginning with FY 2010 and over a five‐year period to assist in carrying out the following:

  • Reviewing and approving premium increases for health insurance coverage.
  • Providing information and recommendations to HHS.
  • Establishing centers to analyze and organize information, and to make the information available to the issuers, health care providers, health researchers, health care policy makers, and the general public. 

 Medical Reimbursement Data Centers

A center must:

  • Develop fee schedules and other database tools that fairly and accurately reflect market rates for medical services and the geographic differences in those rates.
  • Use the best available statistical methods and data processing technology to develop such fee schedules and other database tools.
  • Regularly update such fee schedules and other database tools to reflect changes in charges for medical services.
  • Make health care cost information readily available to the public through an Internet website that allows consumers to understand the amounts that health care providers in their area charge for particular medical services.
  • Regularly publish information concerning the statistical methodologies used by the center to analyze health charge data and make such data available to researchers and policymakers.
Adopt by‐laws that ensure that the center is independent and free from all conflicts of interest and not controlled or influenced by and does not have any corporate relation to any individual or entity that may make or receive payments for health care services based on the centers analysis.

Corresponding Information

  • States are required by Section 1003 of the Patient Protection and Affordable Care Act to work with the Secretary in establishing a process for the annual review of premium increases for health insurance coverage beginning with the 2010 plan year.
  • HHS Request for information April 14, 2010, 45 CFR Parts 146 and 148.
Appropriates $250 million beginning FY 2010 through FY 2014.

No eligible state will receive less than $1 million or more than $5 million for a grant year. Grant amounts will be determined through an HHS formula allocation.

Guidance/Information - Health and Human Services (HHS)

 June 7, 2010: Secretary Kathleen Sebelius announced the availability of $51 million in the first round of Health Insurance Review Grants to states as directed by the Affordable Care Act. The program will ultimately provide a total of $250 million over the next five-year period to assist states in creating and strengthening their insurance rate review processes. All states and the District of Columbia are eligible to receive a grant after submission of a state plan for how the funding will be used to develop or enhance a process of review and approval or disapproval. A state that has successfully applied will receive a $1 million grant during the first round. HHS will take applications for a second round of state grants beginning in Fiscal Year 2011, after new regulations regarding rate review take effect.

HHS News Release

Grant information may be obtained at grants.gov.

April 12, 2010: Secretary Kathleen Sebelius of the Department of Health and Human Services (HHS) has reached out for assistance with the implementation of health insurance reform from state insurance commissioner in a letter addressed to the National Association of State Insurance Commissioners (NAIC). In the letter, Secretary Sebelius stressed the importance of state officials in guiding the efforts of implementation and playing a critical role as the process progresses. Initially, state insurance commissioners will needed to ensure that insurers comply with requirements in Section 2718, which directs insurers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as medical loss ratio (MLR), and the payment of rebates to enrollees if they fail to comply with minimum standards. NAIC will also play a key role in development of uniform definitions and standardized methodologies in determining the criteria by which plans will be measured. The letter specifically requests input from NAIC on development of these definitions and standardized calculation methods.

NAIC Letter

Request for Public Comment

The Departments of Health and Human Services, Labor and Treasury published a request for public comment on the definition of medical loss ratio in the Federal Register. Section 2718, which includes the provisions directing insurers to provide data information, is slated to go into effect six month after enactment of the legislation, which was March 23, 2010. The Department of Health and Human Services also issued a request for public comment on rate review provisions included in the new law.

CFR Request for Public Comment on the Definition of Medical Loss Ratio
CFR Request for Public Comment on Rate Review Provisions