Medical loss ratios
PPACA requires health insurers to report the percentage of premium revenue they spend on medical services and quality improvement. The percentage is known as the medical loss ratio (MLR). Insurance companies that spend less than 85% of the large group policies' premium revenue on medical care (80% for individual and small group policies) will be required to provide a rebate to their customers starting in 2012. Arkansas's current minimum MLR for individual health insurance policies is 50%.
The law allows the HHS Secretary to adjust the MLR standard for a state if the state can show that meeting the standard may destabilize the individual market and result in fewer choices for consumers. As of April 4, 2011, nine states had applied for a waiver from the 80% standard and one state (Maine) had received it. Arkansas has not applied for a waiver.
Federal Documents
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CCIIO: Medical loss ratio background and state waivers
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Medical Loss Ratio Regulations
Federal regulations requiring health insurers to spend 80-85%of consumers’ premiums on direct care for patients, rather than administrative costs, starting in 2011.
Arkansas Documents
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AR Insurance Department Current Medical Loss Ratio
PDF
1981 AID Bulletin establishing the state's current medical loss ratio of 50% for individual health insurance policies.