Medical Loss Ratio (MLR) rebate letters are starting to arrive:
I JUST GOT AN MLR REBATE IN THE MAIL!!!
— Colin Baillio (@colinb1123) September 25, 2018
MLR is part of the ACA. The regulation requires insurers to refund customers money if the small group or individual market plans spend less than 80% of net premiums on claims or quality improvement expenses and for large groups, the insurer must spend 85% of net premiums on claims or quality improvement.
MLR has not been a big deal. Insurers quickly adjusted their pricing schemes and provider contracts to minimize their MLR exposure. Individual market insurers had massive MLRs in 2014 and 2015, meh MLRs in 2016 and “normal” MLRs in 2017.
MLR is a minor story this year. It is $76 here and $122 there. If I got a $122 check in the mail, I know I won’t complain but it is not huge income shock and given insurer pricing it is not a common income shock.
However, I am expecting MLR to be a big deal in 2019 for individual market buyers. The big story on the ACA individual market pricing is that insurers massively overpriced 2018. Bob Herman at Axios has done yeoman work
Between the lines: These data suggest the Blues have raised premiums well beyond what they thought they’d ultimately pay to providers….
MLR is based on rolling three year calculation. The Fall 2019 rebates will be based on a “meh” 2016, a “normal” 2017 and a “wicked low” 2018. I think states that had mostly monopolistic insurance markets in 2017 and 2018 (including North Carolina) will be more likely to have significant and widespread MLR rebates to the individual market buyers than states with very competitive markets.
MLR rebates in 2019 will be widespread and they could be large in some states. This is going to be a fascinating economics experiment and an interesting political event.