Minimum Commercial Medical Loss Ratio and Rebates Q&A

For plans from Aetna and from Coventry Health Care (an Aetna company)

The minimum medical loss ratio, or MLR, requirement is part of the Affordable Care Act (ACA). The MLR requirements set minimum percentages of premium dollars that health plans must spend on health care (medical costs and activities that improve health care quality).

Can you show me the math?

We start with the total amount spent on claims and allowable quality improvement activities. We divide that by the amount we took in (premiums minus allowed deductions, such as taxes). In general, the result of that calculation has to be equal to or greater than 85 percent for large groups and 80 percent for small groups and individuals.

Here’s a basic example: Let’s say we spent $100 in claims and quality improvement activities. We collected $150 in premiums and spent $25 for taxes and fees. Divide the $100 in claims and quality improvement by $125 in adjusted premiums, and we get a ratio of 80 percent.

This example is for a large group. Remember, for large groups insurers need to spend 85 percent In this case, we would pay a rebate to the policyholders in the pool for the remaining 5 percent. Each employer gets its proportionate share of the 5 percent total, based on premiums paid.

This is a simple view of a very complex calculation that impacts many segments of our insured business.

How much are you paying in rebates?

Across the entire country, Aetna and its subsidiaries, including Coventry Health Care, are paying a total of $33.6 million. This represents approximately 0.15 percent of premium Aetna earned in 2013 for the MLR rebate-eligible pools.

Only some lines of business in some states will receive rebates, however. The rebates we are paying are modest, and most policyholders won't receive a rebate at all. 

What’s the timing?

• In June of each year, Aetna and Coventry Health Care (an Aetna company) file MLR reports and rebate calculations with the Federal government. These reports are based on the previous year's premium and claims data.
• In compliance with the law, we distribute all payable premium rebates based upon the previous year's MLR experience.

If you are paying a rebate, does that mean you charged too much for premiums?

When we price our products, we have to project both the cost of medical services and quality improvement activities, and the amount of services that our members will use in the next year. Sometimes, medical expenses are less than we expected. When that happens and costs fall below the minimum MLR, we pay premium rebates to our customers. We believe that the final rebate calculations demonstrate appropriate pricing in the face of a slowly recovering economy and lower than expected medical expenses.

I’m an Individual Plan member and…

If I am due a rebate, when and how will I get it?

We are mailing rebate checks directly to individual policyholders who are owed a rebate by August 1.

I was an Aetna or CoventryOne Individual member last year, but I’m not a member now. If my former plan is due a rebate, will I get one?

Yes. If the Aetna or CoventryOne Individual plan in which you were a subscriber is due a rebate, then we will mail you a rebate check by August 1.

I’m a member of an Aetna or Coventry Health Care group plan and…

If there is a rebate, would I get a rebate or would it go to my employer or group policyholder?

In nearly all cases, rebates go to the policyholder, which is the employer or other group offering the plan. The employer then has to follow government guidelines on how to use the rebates. The employer must use the amount of an MLR rebate that is proportionate to the premiums paid by subscribers, to benefit its subscribers. There are several ways employers can choose to do this.

Can I find out if my employer or group policyholder is getting a rebate?

If your employer is getting a rebate for your plan, we will mail you a notice by August 1.

Does my employer have to distribute the rebate to its employees who are in the plan?

Employers have to follow government guidelines on how they can use the rebate. Employers will need to determine the best way to use the rebate. The employer must use the amount of an MLR rebate that is proportionate to the premiums paid by subscribers, to benefit its subscribers. There are several ways employers can choose to do this.

I heard in the media that Aetna or Coventry Health Care is paying rebates in my area, but my employer says we are not getting a rebate. Why not?

Health plans pay rebates to specific pools of plans. A pool is determined by the size of your plan (individual, small group or large group), the state where your plan’s contract is written, and the type of plan you have. You may live in a state where some plans are getting rebates, but you may be in a different type of plan. Your health plan contract also may be issued in another state. This is common for employers who have employees in more than one state.