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Medical Loss Ratio

The managed care regulation require standards for the calculation and reporting of a medical loss ratio (MLR) applicable to Medicaid and Children's Health Insurance Program (CHIP) managed care contracts, including contracts with managed care organizations (MCOs), prepaid inpatient health plans (PIHPs), and prepaid ambulatory health plans (PAHPs).

Medical Loss Ratio (MLR) Report

CMS regulations at 42 CFR § 438.74(a) require that states must annually submit, with their rate certification required in 42 CFR § 438.7, a summary description of the MLR report(s) received from the managed care organization (MCOs), prepaid inpatient health plans (PIHPs), and prepaid ambulatory health plans (PAHPs) under contract with the state.  For more information on the report, including the standard format, with instructions, and details on how to submit it to CMS, visit the Medicaid and CHIP Managed Care Reporting page.

Informational Bulletin: Medicaid Managed Care Frequently Asked Questions (FAQs) – Medical Loss Ratio

This CMCS Informational Bulletin (CIB) containing an FAQ document addresses common questions related to the MLR requirements in 42 CFR 438.8, as well as implementation and compliance with the requirements added by the SUPPORT Act.

Medical Loss Ratio (MLR) Requirements Related to Third-Party Vendors

This Informational Bulletin provides additional clarification and specific examples of the regulatory requirements for determining the amounts that can be included as incurred claims in a Medicaid or CHIP managed care plan’s MLR, particularly when a managed care plan uses a third-party vendor in a subcontracted arrangement. This guidance will assist states in ensuring that revenues, expenditures, and amounts are appropriately identified and classified for each Medicaid and CHIP managed care plan’s MLR.

Medicaid and CHIP Managed Care Medical Loss Ratio Credibility Adjustment

In alignment with medical loss ratio (MLR) requirements for health plans operating in the private market and Medicare Advantage, the Medicaid and CHIP managed care rule provides a credibility adjustment to account for the potential variation in smaller managed care plans. As defined in 42 CFR 438.8(b), the credibility adjustment is used to account for random statistical variation related to the number of enrollees in a managed care plan. The Centers for Medicare & Medicaid Services (CMS) will publish MLR credibility adjustment factors annually. 

CMS has published the MLR credibility adjustment factors for Medicaid and CHIP managed care plans—managed care organizations (MCOs), prepaid inpatient health plans (PIHPs), and prepaid ambulatory health plans (PAHPs)—with contract rating periods starting on or after July 1, 2017. The CIB provides the Office of the Actuary methodology for developing the MLR credibility adjustments, as well as examples of how states should apply the MLR credibility adjustments.