The Medical Loss Ratio (MLR) ensures that policyholders receive value for the premium they pay for their health insurance coverage. The MLR exams are about validating that health insurance issuers (issuers) offering commercial individual or group health insurance coverage are complying with the MLR requirements established by the Affordable Care Act (ACA).

Why Perform MLR Exams?

The purpose of a MLR exam is to assess compliance with state MLR regulations, if applicable, and the requirements of Title 45 of the Code of Federal Regulations (CFR), Part 158, which implements section 2718 of the Public Health Service Act (PHS Act). Section 2718 of the PHS Act was added by the ACA and generally requires issuers offering individual or group health insurance coverage to submit an MLR Annual Reporting Form (MLR Form) to the Secretary of the U.S. Department of Health and Human Services (HHS) for each state in which the issuer has written direct health insurance coverage.

The MLR is the proportion of direct premium revenue expended by an issuer on clinical services and activities that improve health care quality in a given state and market (e.g., individual, small group, large group, etc.). Section 2718 of the PHS Act also requires an issuer to provide rebates to the subscriber, policyholder, and/or government agency that paid the premium if it does not meet the MLR standards established by the law for the relevant market. The MLR Form is used by issuers to report the MLR data elements, calculate the MLR ratio and determine the amount of rebates, if applicable.