Filed Under:Health Insurance, Individual Health

Industry, Consumer Advocates Divided on Statutory MLR Ratio Calculations

ER visit for a wound? This is in the numerator of an MLR. Image, AP
ER visit for a wound? This is in the numerator of an MLR. Image, AP

The NAIC is trying to figure out if medical loss ratio (MLR) rebate payments reflected in the numerator prior to 2014 also should be reflected in the numerator in 2014 and 2015, if they represent an incurred rebate for one of the three calendar years in the current year’s MLR calculation.

While a consumer representative opposition said that he does not support the current thinking in the NAIC draft, the health insurance industry does.

Jost had argued that the approach recommended by IRD14-03 does not achieve the statutory MLR thresholds of 80% or 85% if the insurer prices to achieve an MLR below 80% or 85%, and the NAIC formula won’t produce a sufficient rebate, as required under the Affordable Care Act.

Jost assumes that a carrier prices products to achieve a loss ratio of 70% each year, but then issues rebates. However, with the rebates included in the numerator, the  NAIC IRD014-013 formula will not produce a sufficient rebate, since the sum of the money spent as well as rebates does not reach 80%, but converges to about 76%.  If the rebates are not added into the numerator of the formula for subsequent years, then each year the rebate is sufficient, he said.

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Nichole Morford

Nichole Morford
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