Private Health Insurance: Early Experiences Implementing New Medical Loss Ratio Requirements

To help ensure that Americans receive value for their premium dollars, the Patient Protection and Affordable Care Act (PPACA) established minimum "medical loss ratio" (MLR) standards for health insurers. The MLR is a basic financial indicator, traditionally referring to the percentage of premiums spent on medical claims. The PPACA MLR is defined differently from the traditional MLR. Beginning in 2011, insurers must meet minimum MLR requirements or pay rebates to enrollees. While insurers' first set of data subject to the MLR requirements will be for 2011, and is not due until June 2012, insurers prepared preliminary PPACA MLR data for 2010. GAO examined: (1) what can be learned from the traditional MLR data reported by health insurers prior to PPACA; (2) what factors might affect the MLRs that insurers will report under PPACA; and (3) what changes in business practices, if any, have insurers made or planned to make in response to the PPACA MLR requirements. GAO analyzed premiums, claims, and traditional MLR data for nearly all insurers for 2006- 2009 and interviewed a judgmental sample of seven insurers--selected to provide a range based on their size, profit status, and the number of states in which they operated--about their experiences using the PPACA MLR definition.