Filed Under:Health Insurance, Individual Health

MLR Calculations to Get Even More Complicated

Kansas Insurance Commissioner and NAIC health Insurance leader Sandy Praeger. Image: Courtesy of AP
Kansas Insurance Commissioner and NAIC health Insurance leader Sandy Praeger. Image: Courtesy of AP

The National Association of Insurance Commissioners (NAIC) has been working to figure out how to correctly compute health insurers’ medical loss ratios (MLR) for future years, as mandated under the Patient Protection and Affordable Care Act (PPACA).

For example, committee members are asking in draft documents whether reporting of MLR rebate calculations for 2014-2016 be modified to reflect reinsurance, risk corridor payments and risk adjustment payments and credits.

Jost assumes that a carrier prices products to achieve a loss ratio of 70% each year. He says that if the rebates are the previous rebates are not added to the numerator of the formula for subsequent years, then each year the rebate is sufficient for the sum of the (losses + rebates ) / premium to equal 80%. Otherwise, it will be about 76%, he says, which is too low.

In, RD14-016, the HCRAWG MLR Subgroup recommended that reporting of MLR rebate calculations for 2014-2016 be modified to reflect reinsurance, risk corridor payments and risk adjustment payments and credits --or “the 3Rs.”

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Nichole Morford

Nichole Morford
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