An examination of the medical loss ratio (MLR) in 2014 suggests that the financial performance of insurers has not changed substantially since the years before the Affordable Care Act, according to the Kaiser Family Foundation.
The MLR has increased from 80 percent in 2010 to 85 percent in 2013, KFF said. This makes sense, as the ACA requires insurers to achieve an MLR of 80 percent for individual and small-group plans, and 85 percent for large-group plans; those who do not must pay a rebate to customers. Insurers have been complying with the medical loss ratio, as customer rebates dropped from $1 billion in 2011 to $325 million in 2013.
The actual MLR for 2014 won't be known until the end of the month, when insurers are due to receive their reinsurance payments, but KFF estimates that it will range between 81 percent and 87 percent.
The low estimate assumes that the Centers for Medicare & Medicaid Services will dole out the full $9.7 billion available in reinsurance fees for the 2014 plan year, KFF said, while the high estimate is based on the $5.5 billion in expected reinsurance payment data reported to state insurance departments thus far. California insurers file separately and have have yet to do so, KFF noted, while the federal government may make upward adjustments.
The data reinforces the notion that insurers have not had trouble complying with the medical loss ratio, as FierceHealthPayer previously reported. "Even in the worst case," KFF said, "financial results were not substantially different from the years prior to when the ACA's major changes in insurance market rules took place in 2014."
However, KFF concluded, the low estimate may "validate" insurers' requests for higher rates in 2016, as it may reflect "unexpectedly high" expenses, particularly for prescription drugs.
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