August 21, 2024
What is the Medical Loss Ratio or “MLR”?
Federal law (the Affordable Care Act) and Massachusetts state law require that health insurance companies spend a minimum percentage of their policyholders’ premiums on medical expenses. Medical expenses are defined as not only the clinical care and services provided to plan members, but activities designed to improve health care quality as well.
This minimum percentage, or threshold, that health insurers must meet is called the Medical Loss Ratio (“MLR”). The MLR standard applies to health insurance plans offering group or individual coverage. It does not apply to self-insured plans.
When setting premium rates for each upcoming year, insurers must make calculated estimates based on the most current cost trends. Due to a number of factors, what’s projected often differs from what’s actually spent (as with setting household budgets).
If a health insurer spent less on medical expenses than what was projected (the amount upon which premiums for the year ahead are based), the MLR requirement ensures that affected consumers receive money back on the unused portion of their premium. Learn more about MLR.
Our calculations have determined that Tufts Health Plan Massachusetts-based fully insured commercial HMO and PPO products in 2023 are not eligible for a rebate as the threshold was met for these segments.
If you have any questions, please contact your Account Manager.