Aetna’s Medical Loss Ratio (MLR) Filing in Second Year Demonstrates Appropriate Pricing
The Medical Loss Ratio (MLR) provision of the Affordable Care Act sets minimum percentages that health plans must spend on medical costs and quality improvement activities. Insurers file reports with the federal government detailing where they met the minimum, where they didn’t, and how much they will pay their insured customers in rebates.
We’re very pleased with Aetna’s results. This year we will pay out $27.8 million for the 2012 experience year. This total is significantly lower than last year and is a clear indication that we met our goal—to price our business so that we deliver the greatest value to our customers, remain competitive in the market and grow our business.
In this second year of MLR reporting, Aetna’s rebates represent 0.2 percent of the premiums we collected. The rebates we are paying are modest, and most policyholders won’t receive a rebate at all. We’ll share more rebate information with you within a few weeks.
What happens next?
By August 1, Aetna will send notices to all subscribers and policyholders of plans due a rebate. In most cases, for group plans, policyholders (plan sponsors) will receive the plan’s rebate. In certain circumstances, the government has directed that the rebate go directly to subscribers of the group policyholders (e.g., terminated plans where we cannot locate the policyholders). The amount of the check will depend on the total premiums paid by the customer in 2012. We’ll also include a summary of the government’s guidelines on how group policyholders may use the rebate money.
Does this mean the Minimum MLR provisions are working?
The Minimum MLR rules demonstrate an insurer’s ability to accurately predict medical cost trend and price according to it. However, they do nothing to address rising medical costs. A 2012 Commonwealth Fund study found that America’s high health care price tag is primarily due to high prices for medication and medical services, as well as a good deal of use of expensive technology. And at least a third of the American population is obese, a condition that drives up health spending.
At the same time, the Institute of Medicine has estimated that waste and inefficiency in health care cost some $750 billion a year.
These are the issues primarily driving the cost of health care premiums. Aetna is focused on addressing them through innovative programs and methods, health information technology, and consumer engagement. We are concerned that the Minimum MLR rules will limit our ability to invest in these initiatives, which will have the greatest impact on costs at the heart of today’s health care. The rules also unnecessarily increase administrative costs for us and our customers.
However, we are committed to complying with the law. We are pleased with our ability to price appropriately in this second year of the law, and expect to continue improving our pricing accuracy so we can continue to grow our business and avoid future rebates. Our goal is to provide our customers with competitive pricing that reflects medical costs in their markets.