888-765-5400Affordable Care Act and Medical Loss Ratios
The Affordable Care Act (ACA) requires individual and group health plans to report publicly their medical loss ratios (MLR), which represent the 
percentage of each premium dollar that is spent on health care services and quality improvement. ACA also requires such plans beginning on January 1, 2011, to provide an annual rebate to enrollees if the MLR is below the minimum requirement for the applicable market. The minimum requirement is 80% for individual and small group markets and 85% for the large group market.
Though the ACA directs a national standard for all insurance carriers’ MLR, some states may require more stringent ratios. The ACA’s MLR requirements will serve as a floor, below which insurance carriers may not fall without being penalized as noted above. However, US Department of Health and Human Services (HHS) has the discretion to grant a state-specific waiver of the MLR requirement, and several states have requested and received waivers. North Carolina received an MLR waiver from HHS, effectively reducing the minimum MLR for individuals in 2011 to 75%. In 2012, that requirement will be raised to the statutory minimum of 80%. Otherwise, MLR requirements are 80% for small groups, and 85% for large groups.
Bulletins, Rules, and Notices
HHS and the Internal Revenue Service (IRS) have released a series of different forms of guidance regarding the MLR requirements for insurers. From December of 2011 through May of 2012, many interim final rules, final rules, bulletins, and notices have been issued clarifying and regulating how MLR will be implemented. One recent rule requires that insurers that met or exceeded MLR in 2011 send notices on or after July 1, 2012 to all customers to inform them of the MLR rebate requirement and advise them that they will not receive a rebate. This will likely add administrative expenses, counter to the goals of the MLR provision. After the multitude of instructions from the federal government, insurers were required to file for the first time using the newly developed MLR reporting form by June 1, 2012 to report MLR for the calendar year 2011.
BCBSNC and MLR
BCBSNC submitted a Supplemental Health Care Exhibit to the National Association of Insurance Commissioners (NAIC) on April 1 to report on preliminary MLRs and an MLR reporting form to HHS on May 29, 2012 to meet the June 1 requirement on updated MLRs and for rebates. BCBSNC exceeded every ACA MLR requirement. For individuals, the MLR was 85%; for small groups it was 85.5%; and for large groups it was 89.5%. In total, BCBSNC spent $230 million more on medical care for our members than is required by law.
This information has been prepared by Blue Cross and Blue Shield of North Carolina to assist our customers in understanding Health Care Reform. This publication is for information purposes only. It is not legal or tax advice. Please consult with your attorney or tax advisor for further advice. As regulations and other interpretive guidance are published, this information may change. We will continue to work with our customers going forward to provide updates and further assistance. 11/30/2012 U#7259aae
For more information on health insurance coverage in North Carolina, please visit our website at www.nchealthplans.com or call our toll free number 888-765-5400 and speak with one of our professional agents. Our agency provides coverage for health insurance in North Carolina through Blue Cross Blue Shield of North Carolina (BCBSNC). You may qualify for a 15% healthy lifestyle discount if you are in excellent health. Call us for details.