The Medical Loss Ratio (MLR) provision established by the Affordable Care Act (ACA) requires health insurers who fail to spend specified percentages of their premium income on medical and quality care improvement expenses to pay rebates to their customers. The goal of this provision is to curb growth in health care premiums while ensuring that plans adequately cover healthcare expenses. In 2014 and 2015, health plans reimbursed customers $478 million and $406 million respectively. For 2016, health plans showing improved management of their MLRs reimbursed customers $451 million, equating to approximately $113 per benefiting family.
Key Details about the MLR
On December 28, 2017, the Department of Health and Human Services (HHS) released the 2016 Medical Loss Ratio (MLR) data which includes MLR rebates due to consumers. Subscribers to Mark Farrah Associates’ Health Coverage Portal™ and the SHCE & MLR Data may access this important data with the benefit of NAIC company codes mapped to HIOS codes used for government reporting by health plans.
In this month’s Healthcare Business Strategy, MFA summarizes some key findings from the HHS report, with a focus on health plan performance as it relates to the Medical Loss Ratio and related rebates due to consumers.
State Focus
| States Leading MLR Rebates | |||
| State | Adjusted Premiums | 2016 Total MLR Rebate | Rebate as a % of Premium |
| FL | $20,948,824,906 | $69,858,385 | 0.33% |
| MD | $7,108,329,182 | $60,916,185 | 0.86% |
| MI | $11,473,760,203 | $47,254,187 | 0.41% |
| MA | $11,000,414,144 | $40,563,956 | 0.37% |
| NY | $22,886,245,693 | $31,637,681 | 0.14% |
| VA | $9,531,661,608 | $26,394,904 | 0.28% |
| GA | $9,031,961,472 | $20,226,192 | 0.22% |
| CA | $68,098,179,924 | $17,296,405 | 0.03% |
| DC | $4,560,863,883 | $17,283,050 | 0.38% |
| MO | $5,956,443,103 | $14,052,364 | 0.24% |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | |||
MLR premiums and rebate figures were aggregated for all health plans that reported doing business in each state. For 2016, Florida led the country with approximately $70 million in MLR rebates, a significant increase from $47 million in 2015. While Maryland was not the top state for rebate disbursements, the total amount of Maryland’s rebates represented a high percentage of rebates to total adjusted premiums at .86%, from .69% in 2015. This may indicate that health plans in Maryland spent less on medical and health care quality improvement costs as compared to premiums charged.
| Largest Increases in MLR Rebates | |||
| State | 2016 Total MLR Rebate | 2015 Total MLR Rebate | YOY Change in Rebate |
| MA | $40,563,956 | $353,864 | $40,210,093 |
| FL | $69,858,385 | $46,714,311 | $23,144,074 |
| MD | $60,916,185 | $46,195,431 | $14,720,754 |
| MI | $47,254,187 | $34,411,448 | $12,842,739 |
| NJ | $11,331,648 | $2,634,720 | $8,696,928 |
| Total | $229,924,361 | $130,309,774 | $99,614,587 |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | |||
As previously mentioned, total rebates paid for 2016 were $451 million, up 11% from $406 million in 2015. The table above shows which states had the greatest overall year-over-year increases in aggregate MLR rebates paid by health plans. However, as indicated in the chart below, not all states realized higher rebates for 2016. California, New York, Indiana, Mississippi and Missouri had the greatest overall decreases in aggregate MLR rebates paid by health plans.
| Largest Decreases in MLR Rebates | |||
| State | 2016 Total MLR Rebate | 2015 Total MLR Rebate | YOY Change in Rebate |
| CA | $17,296,405 | $37,164,092 | ($19,867,687) |
| NY | $31,637,681 | $46,661,492 | ($15,023,811) |
| IN | $6,728,777 | $15,769,634 | ($9,040,857) |
| MS | $8,243,309 | $16,020,721 | ($7,777,412) |
| MO | $14,052,364 | $21,423,338 | ($7,370,973) |
| Total | $77,958,537 | $137,039,276 | $59,080,739 |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | |||
It is important to note that Mark Farrah Associates is reporting all data as filed with CMS in the annual MLR reporting requirements. We are not adjusting the data to account for differences in the number of reporting plans between 2016 and 2015, nor have we adjusted for missing plans year-over-year.
Market Segment Analysis
MFA assessed the Individual, Small Group and Large Group comprehensive market’s Adjusted Premiums, MLR rebates and Weighted Average MLR for the leading companies. This helps to provide additional competitive insights into how companies are navigating the ACA regulated health insurance markets. The next three sections will address findings in each segment.
Individual Comprehensive
| 2016 Indvidual Comprehensive-Largest Segment Rebates | ||||
| Company | Weighted Average MLR | Adjusted Premium | MLR Rebate | Rebate as a % of Premium |
| TUFTS | 81.90% | $586,682,649 | $38,771,093 | 6.61% |
| CENTENE | 86.82% | $2,781,944,646 | $24,106,162 | 0.87% |
| CIGNA | 90.37% | $757,168,105 | $11,275,051 | 1.49% |
| UNITEDHEALTH | 92.96% | $5,979,896,888 | $10,635,288 | 0.18% |
| ANTHEM | 84.52% | $7,890,640,648 | $8,715,709 | 0.11% |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | ||||
2016 MLR rebates paid for the Individual comprehensive segment were $102 million which is .14% of the $74 billion collected in premiums for this segment. It is important to point out that for payment purposes, health insurance MLR rebates are calculated at the plan and state level. Tufts’ individual business is in the state of Massachusetts which has an 88% minimum MLR for the segment. With an average MLR of 81.9%, well below the 88% minimum, Tufts leads all other companies in this segment with $38M of rebates, or 6.61% of premium. All of the remaining companies had average MLRs above the ACA-established 80% minimum for the segment. However, all of these companies had affiliate plans with MLRs, at the state-level, below the 80% standard, leading to the rebates due.
| 2016 Indvidual Comprehensive-Segment Leaders | ||||
| Company | Weighted Average MLR | Adjusted Premium | MLR Rebate | Rebate as a % of Premium |
| ANTHEM | 84.52% | $7,890,640,648 | $8,715,709 | 0.11% |
| UNITEDHEALTH | 92.96% | $5,979,896,888 | $10,635,288 | 0.18% |
| HCSC | 99.71% | $5,100,957,213 | $0 | |
| AETNA | 97.72% | $4,483,102,475 | $77,462 | 0.00% |
| KAISER FOUNDATION | 95.58% | $3,826,391,164 | $0 | |
| GUIDEWELL MUTUAL | 81.04% | $3,537,998,608 | $0 | |
| HUMANA | 94.58% | $3,521,869,873 | $1,078,319 | 0.03% |
| BLUE SHIELD OF CA | 82.95% | $3,441,579,092 | $0 | |
| CENTENE | 86.82% | $2,781,944,646 | $24,106,162 | 0.87% |
| MOLINA | 91.41% | $2,162,565,880 | $90,984 | 0.00% |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | ||||
The above table provides a look at the largest plans in the Individual segment for 2016, based on premiums, independent of MLR rebates paid. Anthem led in this segment with $7.9 billion in Adjusted Premiums. Anthem’s relatively low weighted average MLR of 84.52% was among one of the lowest of the segment leaders. UnitedHealth, the second-largest plan in the segment, had an average MLR that was approximately 10% higher than Anthem’s, reflecting greater spending of premium income on medical costs. HCSC’s 99.71% MLR, up from 98.47% in 2015, was the highest among the leaders in this segment. GuideWell Mutual (Florida Blue) continues to maintain the lowest MLR among the segment leaders.
Small Group Comprehensive
| 2016 Small Group Comprehensive-Largest Segment Rebates | ||||
| Company | Weighted Average MLR | Adjusted Premium | MLR Rebate | Rebate as a % of Premium |
| UNITEDHEALTH | 82.70% | $12,136,210,652 | $39,657,799 | 0.3% |
| CAREFIRST | 78.93% | $1,498,992,773 | $35,086,168 | 2.34% |
| BCBS OF MI | 77.72% | $1,180.029,465 | $31,892,661 | 2.70% |
| ANTHEM | 81.19% | $6,657,973,908 | $12,603,160 | 0.19% |
| GUIDEWELL MUTUAL | 80.04% | $1,142,509,065 | $10,346,849 | 0.91% |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | ||||
2016 MLR rebates for the Small Group segment were $153 million, or .22% of the $69.5 billion segment. Within this segment, UnitedHealth paid the highest volume of 2016 rebates with an aggregate outlay of $39.6 million. Carefirst ranked second with $35 million in rebates which equated to 2.34% of their segment premiums. Each company’s MLR rebates are calculated at the plan and state level. All but Carefirst and Blue Cross Blue Shield of Michigan had MLRs above the ACA-established 80% segment minimum. However, all of them had affiliate plans with MLRs at the state-level below the 80% standard which led to the rebates due.
| 2016 Small Group Comprehensive-Segment Leaders | ||||
| Company | Weighted Average MLR | Adjusted Premium | MLR Rebate | Rebate as a % of Premium |
| UNITEDHEALTH | 82.70% | $12,136,210,652 | $39,657,799 | 0.3% |
| ANTHEM | 81.19% | $6,657,973,908 | $12,603,160 | 0.19% |
| HCSC | 87.93% | $5,565,823,817 | $0 | |
| AETNA | 87.20% | $4,428,585,550 | $10,322,383 | 0.23% |
| KAISER FOUNDATION | 91.18% | $4,279,909,548 | $0 | |
| BLUE SHIELD OF CA | 80.00% | $2,400,282,894 | $0 | |
| HUMANA | 85.68% | $2,339,811,373 | $1,952,060 | 0.08% |
| CAREFIRST | 78.93% | $1,498,992,773 | $35,086,168 | 2.34% |
| CENTENE | 86.60% | $1,381,992,246 | $1,237 | 0.00% |
| BCBS OF NJ | 81.22% | $1,353,462,584 | $0 | |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | ||||
The table above provides a look at the largest plans in the Small Group segment. HCSC and Kaiser were two of the larger players in this segment that incurred no rebates in 2016. Naturally, they each had average MLRs that were higher than their segment leading peers. CareFirst’s $35 Million of rebates were mostly related to its insurance business in the state of Maryland.
Large Group Comprehensive
| 2016 Large Group Comprehensive-Largest Segment Rebates | ||||
| Company | Weighted Average MLR | Adjusted Premium | MLR Rebate | Rebate as a % of Premium |
| UNITEDHEALTH | 87.58% | $20,501,942,386 | $64,668,736 | 0.32% |
| GUIDEWELL MUTUAL | 90.34% | $5,387,711,027 | $29,504,567 | 0.55% |
| AETNA | 88.37% | $14,581,844,056 | $23,672,191 | 0.16% |
| NIPPON LIFE | 81.00% | $256,671,554 | $16,915,750 | 6.59% |
| CAREFIRST | 90.93% | $5,246,066,629 | $12,523,258 | 0.24% |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | ||||
2016 MLR rebates for the $205 billion Large Group segment were $190 million. Within the segment, UnitedHealth paid the highest volume of MLR rebates, outlaying over $64 million. Nippon Life’s $16.9 million in rebates ranked fourth, however, this equates to 6.6% of segment premiums. Once again, the company’s MLR rebates are calculated at the plan and state level. Four of the top five companies required to pay Large Group rebates had average MLRs above the ACA- established 85% segment minimum. However, all of them had affiliate plans with MLRs at the state-level below the 85% standard leading to the rebates due.
| 2016 Large Group Comprehensive-Segment Leaders | ||||
| Company | Weighted Average MLR | Adjusted Premium | MLR Rebate | Rebate as a % of Premium |
| KAISER FOUNDATION | 89.74% | $31,416,687,301 | $8,491,295 | 0.03% |
| ANTHEM | 90.28% | $23,296,939,427 | $9,171,536 | 0.04% |
| UNITEDHEALTH | 87.58% | $20,501,942,386 | $64,668,736 | 0.32% |
| AETNA | 88.37% | $14,581,844,056 | $23,672,191 | 0.16% |
| HCSC | 92.01% | $13,511,541,790 | $0 | |
| CIGNA | 90.16% | $6,559,870,555 | $12,046,495 | 0.18% |
| GUIDEWELL MUTUAL | 90.34% | $5,387,711,027 | $29.504,567 | 0.55% |
| CAREFIRST | 90.93% | $5,246,066,629 | $12,523,258 | 0.24% |
| BCBS OF MI | 87.33% | $4,666,984,725 | $0 | |
| BLUE SHIELD OF CA | 89.93% | $4,188,048,520 | $541,583 | 0.01% |
| Source: Health Coverage Portal™, Mark Farrah Associates, aggragate data observations from the HHS|CMS Annual MLR Reporting Requirements | ||||
The above table provides a look at the largest plans in the Large Group segment for 2016. While this is the largest segment based on premiums, Large Group business generated the lowest amount of MLR rebate dollars in terms of percent of sales with only .09% returned to customers. UnitedHealth and GuideWell lead the segment with $65M and $30M of rebates, respectively.
Conclusion
Overall, rebates paid to consumers continue to be a small portion of industry premiums. With a limited number of exceptions, rebates due to customers were generally not financially material and have had a minimal overall impact on insurance companies. Likewise, the 2016 average rebate per family of $113 was not a significant factor in reducing consumers’ health insurance costs. It is important to note that consumers benefitted from $2.7 billion in Health Care Quality improvements undertaken by insurance companies, in part due to the ACA MLR provision.
SCHE & MLR Data
The data used in this analysis brief was obtained from Mark Farrah Associates' Health Coverage Portal TM as available from the Department of Health and Human Services. Each year, MFA updates its products with the latest MLR data. Additionally, MFA maintains financial data as well as enrollment and market share for the health insurance industry in the subscription-based Health Coverage Portal™.
For more information about these products, refer to the product videos and brochures available on Mark Farrah Associates’ website or call 724-338-4100.
About Mark Farrah Associates (MFA)
Mark Farrah Associates (MFA) is a leading data aggregator and publisher providing health plan market data and analysis tools for the healthcare industry. Our product portfolio includes Health Coverage Portal™, County Health Coverage™, Medicare Business Online™, Medicare Benefits Analyzer™, and Health Plans USA™. Visit our website at www.markfarrah.com to learn more about our offerings.
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Glossary
Weighted Average MLR – For analysis purposes, Mark Farrah Associates calculated average MLR weighted on the adjusted premiums for each company by segment. The MLRs used in the calculations are average ratios based upon the 2015 & 2016 data, as reported on line 6.2 of Part 3 of the HHS MLR and Rebate Calculation schedule.
Sources
Centers for Medicare & Medicaid Services
“Public Use File for 2016 (as of October 19, 2017)”
https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html
“Summary of 2016 Medical Loss Ratio Results (as of December 2 8, 2017)”
https://www.cms.gov/CCIIO/Resources/Data-Resources/Downloads/Medical_Loss_Ratio_2016_Annual_Reportpdf.pdf