News & Updates
The Medical Loss Ratio (MLR) provision of the Affordable Care Act sets minimum percentages that health plans must spend on medical costs and quality improvement activities. Insurers file reports with the federal government detailing where they met the minimum, where they didn't, and how much they will pay their insured customers in rebates.
Aetna is very pleased with their results. This year they will pay out $27.8 million for the 2012 experience year. This total is significantly lower than last year and is a clear indication that they met their goal—to price their business so that they deliver the greatest value to their customers, remain competitive in the market and grow their business.
In this second year of MLR reporting, Aetna's rebates represent 0.2 percent of the premiums they collected. The rebates they are paying are modest, and most policyholders won't receive a rebate at all. They'll share more rebate information with you within a few weeks.
What happens next?
By August 1, Aetna will send notices to all subscribers and policyholders of plans due a rebate. In most cases, for group plans, policyholders (plan sponsors) will receive the plan's rebate. In certain circumstances, the government has directed that the rebate go directly to subscribers of the group policyholders (e.g., terminated plans where Aetna cannot locate the policyholders). The amount of the check will depend on the total premiums paid by the customer in 2012. Aetna will also include a summary of the government's guidelines on how group policyholders may use the rebate money.
Does this mean the Minimum MLR provisions are working?
The Minimum MLR rules demonstrate an insurer's ability to accurately predict medical cost trend and price according to it. However, they do nothing to address rising medical costs. A 2012 Commonwealth Fund study found that America's high health care price tag is primarily due to high prices for medication and medical services, as well as a good deal of use of expensive technology. And at least a third of the American population is obese, a condition that drives up health spending.
At the same time, the Institute of Medicine has estimated that waste and inefficiency in health care cost some $750 billion a year.
These are the issues primarily driving the cost of health care premiums. Aetna is focused on addressing them through innovative programs and methods, health information technology, and consumer engagement. They are concerned that the Minimum MLR rules will limit their ability to invest in these initiatives, which will have the greatest impact on costs at the heart of today's health care. The rules also unnecessarily increase administrative costs for Aetna and their customers.
However, Aetna is committed to complying with the law. They are pleased with their ability to price appropriately in this second year of the law, and expect to continue improving their pricing accuracy so they can continue to grow their business and avoid future rebates. Their goal is to provide their customers with competitive pricing that reflects medical costs in their markets.