MLR checks this year

Given the recent news that CSR payments are very likely for Q4 2017 and somewhat likely for all of 2018, I want to reprise a post from September 2018 on Medical Loss Ratios (MLR).

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.

A normal 2017 will be slightly low 2017 if another $1 to $1.5 billion dollars of CSR payments are eventually recovered by insurers.

5 replies
  1. 1
    Sab says:

    I am kind of curious. I finally got old enough to get on Medicare. I signed up for Medicare, a supplemental and a Part D plan. The combined premiums are a lot lower than what I paid for private individual insurance throuh the exchange.

    Probably a dumb questions to the experts: since I only had one month on the exchange in 2019, but I had three years before (2016, 2017, 2018) will I be entitled to a rebate, or I miss out because I shifted to Medicare before fall of 2019?

  2. 2

    @Sab: It is based on your enrolled months for the period in question. The MLR calculation that will be made in the summer of 2019 is based on enrollment in 2018 with an MLR calculation going back to 2016. You would get a full check if your insurer owes an MLR rebate.

  3. 3
    p.a. says:

    Watch the Rethugs who tried to kill ACA (all of them Katie, state & fed levels) and failed basically through incompetence* try to claim credit for rebates.

    *Not trying to minimize ACA popular support and political pressure from ‘the left’.

  4. 4
    daveNYC says:

    How are the MLR rebates calculated? Specifically, who ensures that the money said to be spent on claims or quality improvements (which seems like a loophole right there) was actually spent on those items?

  5. 5

    @daveNYC: Claims are audited and QI is hard to justify at more than 1% of total revenue. There is a little bit of flex but not a ton once the auditors go to town.

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