Health Care Reform Update: Medical Loss Ratio (MLR) & Uniform Benefit Summaries

The Centers for Medicare & Medicaid Services (CMS) recently issued final regulations on the MLR provision that requires health insurance companies to spend at least 80 percent of health insurance premiums on medical care. Insurance companies that fail to meet the new standard are required to provide a rebate to consumers.

According to CMS, estimates from last year indicate that, starting in 2012, up to nine million Americans could receive rebates worth from $0.6 to $1.4 billion. Early reports suggest insurers lowered premium growth rather than face the prospect of providing rebates. This would explain the many negative and flat renewals that were seen by MEA members for January 1st plan years.

MLR rules took effect on January 1, 2011 but the final rule makes modifications and provides certainty to how the MLR is calculated. Some of the clarifications in the final rule are as follows:

  • Under the proposed rules, there was uncertainty about
    how the rebates would be distributed – whether to plan sponsors, covered employees or both. The final rules allow rebates to be paid to the group policyholder in the case of group plans sponsored by governmental entities and private employer-sponsored plans subject to ERISA. Employers are then required to apply the portion of the rebate attributable to employee contributions to current plan participants either in the form of cash payment or reductions in future contributions to the cost of coverage.
  • Employees will not pay taxes on any rebates they receive.
  • Insurers must provide consumers a notice, showing not just the amount of any rebate, but what the insurer’s MLR means regardless of whether there is a rebate, and how the insurer’s. MLR has improved under the new law.

For more information on the final rule, visit:

Another provision of reform requires plans and insurers to furnish participants with a uniform summary of benefits and coverage that must mirror the templates that were released earlier in 2011. The rules and forms generated quite a bit of public comment to the Department of Health and Human Services (HHS), Department of Labor (DOL) and the Treasury, including requests to extend the deadline for distributing the summaries, which was set for March 23, 2012.

The new FAQ that was released jointly by all three agencies provides that plans and insurers will not be required to distribute the summaries until final regulations are issued. It is expected that the final regulations will give plans and insurers sufficient time to comply with the final rules after they are published. However, the FAQ does not indicate an actual timeframe for the release of the final regulations.

For the full text of the FAQ, go to