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entitled 'Private Health Insurance: Early Effects of Medical Loss 
Ratio Requirements and Rebates on Insurers and Enrollees' which was 
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United States Government Accountability Office: 
GAO: 

Report to the Chairman, Committee on Commerce, Science, and 
Transportation, U.S. Senate: 

July 2014: 

Private Health Insurance: 

Early Effects of Medical Loss Ratio Requirements and Rebates on 
Insurers and Enrollees: 

GAO-14-580: 

GAO Highlights: 

Highlights of GAO-14-580, a report to the Chairman, Committee on 
Commerce, Science, and Transportation, U.S. Senate. 

Why GAO Did This Study: 

Private insurers are required to meet minimum PPACA MLR standards— 
expressed as the percent of premium dollars spent on patient care and 
related activities—and beginning in 2011 they must pay rebates back to 
enrollees and policyholders who paid premiums if they do not meet 
these standards. GAO was asked to review the effects of the PPACA MLR 
requirements on insurers and enrollees and how rebates would change if 
agent and broker payments were excluded from the MLR formula. This 
report examines (1) the extent to which insurers met the PPACA MLR 
standards, and how much they spent on the MLR components of claims, 
quality improvement activities, and non-claims costs; (2) the amount 
of rebates insurers paid and how this amount would have changed with 
agents' and brokers' commissions and fees excluded from the MLR; and 
(3) the perspectives of insurers on the effects of the MLR 
requirements on their business practices. 

To do this work, GAO analyzed the MLR data that insurers reported to 
CMS for 2011 and 2012 (the most recent data available) at the national 
level for each insurance market—large group, small group, and 
individual. GAO also interviewed eight insurers, selected based on 
variation in their size, concentration of business in the individual 
market, geography, whether they paid rebates, and profit status. In 
2012 the number of enrollees covered by these insurers ranged from 
about 70,000 to 7 million. GAO's finding on insurers' perspectives is 
limited to those insurers interviewed and is not representative of the 
perspectives across all insurers reporting MLR data. 

What GAO Found: 

The Patient Protection and Affordable Care Act (PPACA) established 
federal minimum medical loss ratio (MLR) standards for the percentage 
of premiums private insurers must spend on their enrollees' medical 
care claims and activities to improve health care quality, as opposed 
to what they spend on administrative (“non-claims”) costs. Insurers 
report to the Centers for Medicare & Medicaid Services (CMS) annually 
on their PPACA MLRs. More than three quarters of insurers met or 
exceeded the standards in 2011 and in 2012, and the median MLRs among 
all insurers were 88 percent. Insurers' MLRs and their spending on 
claims and non-claims costs varied across different insurance markets. 
Specifically, insurers in the large group market had higher median 
MLRs and spent a higher share of their premiums on enrollees' claims 
and less on non-claims costs, compared to insurers in the individual 
and small group markets. 

Insurers that did not meet or exceed the PPACA MLR standards in 2011 
and 2012 paid rebates in the amounts of $1.1 billion and $520 million 
(respectively) back to enrollees and policyholders who paid premiums 
in those years. These amounts would have decreased by about 75 percent 
had the commissions and fees insurers paid to agents and brokers been 
excluded from the MLRs. Agents and brokers sell insurance products and 
provide various services to consumers and groups related to their 
insurance needs and the commissions and fees charged for these 
services are included in the MLRs. Insurers in the large group market 
paid the highest rebate amount ($405 million) across insurance markets 
in 2011 and insurers in the small group market paid the highest amount 
($207 million) in 2012. Insurers in the individual market were more 
likely to pay rebates than insurers in the small and large group 
markets. GAO found that rebates would have fallen from $1.1 billion to 
$272 million in 2011 if the commissions and fees insurers paid to 
agents and brokers had been excluded from the MLRs, and rebates would 
have similarly fallen from $520 million to $135 million in 2012. GAO's 
calculations assumed that insurers did not make other changes in their 
business practices in response to a different method for calculating 
MLRs. 

GAO found that most of the eight insurers it interviewed reported that 
factors other than the PPACA MLR requirements affected their business 
practices since 2011. All eight insurers reported that they increased 
their premium rates since 2011 and that they based these decisions on 
a variety of factors, such as trends in medical care claims, 
competition with other insurers, and other requirements. Three of the 
eight insurers stated that the MLR requirements were one among several 
factors that influenced their decisions about premium rates. Four of 
the eight insurers stated they had recently made changes to their 
payments to agents and brokers, and one reported the MLR requirements 
were a primary driver behind its business decision. All eight insurers 
GAO interviewed stated that the MLR requirements did not affect their 
decisions to stop offering health plans in certain markets and have 
had no effect or a very limited effect on their spending on quality 
improvement activities. 

GAO provided a draft of this product to the Department of Health and 
Human Services (HHS) for comment. HHS responded that it had no general 
or technical comments. 

View [hyperlink, http://www.gao.gov/products/GAO-14-580]. For more 
information, contact John E. Dicken, 202-512-7114, DickenJ@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Most Insurers Met or Exceeded the PPACA MLR Standards in 2011 and in 
2012, and Insurers' Spending on the MLR Components Varied by Market: 

Insurers Paid $1.1 Billion in Rebates in 2011 and $520 Million in 
2012, and Would Have Paid About 75 Percent Less with Agents' and 
Brokers' Fees and Commissions Excluded, Absent Other Changes in 
Business Practices: 

Most Insurers We Interviewed Reported Factors Other than PPACA MLR 
Requirements as Affecting their Business Practices: 

Agency Comments: 

Appendix I: PPACA Medical Loss Ratios by State in 2011 and 2012: 

Appendix II: Insurers' Spending of Net Premiums by State for 2011 and 
2012: 

Appendix III: PPACA Medical Loss Ratio Rebates by State for 2011 and 
2012: 

Appendix IV: Rebates Insurers Would Have Paid with Agent and Broker 
Payments Excluded from 2011 and 2012 Calculations: 

Appendix V: GAO Contact and Staff Acknowledgments: 

Tables: 

Table 1: The Percent of Insurers that Met or Exceeded the PPACA 
Medical Loss Ratio (MLR) Standards and Insurers' Median PPACA MLRs in 
2011 and in 2012, by Insurance Market: 

Table 2: Insurers' Spending as a Percent of Net Premiums in 2011 and 
2012, by Insurance Market: 

Table 3: Insurers' Spending on Agents' and Brokers' Fees and 
Commissions and Other Categories of Non-Claims Costs as a Percent of 
Total Non-Claims Costs in 2011 and 2012, by Insurance Market: 

Table 4: Amount of PPACA Medical Loss Ratio (MLR) Rebates Insurers 
Paid to Enrollees and Policyholders and Percent of Insurers That Paid 
Rebates in 2011 and 2012, by Insurance Market: 

Table 5: Amount of Rebates Insurers Would Have Paid to Enrollees and 
Policyholders with Agents' and Brokers' Commissions and Fees Excluded 
from PPACA Medical Loss Ratio and Rebate Calculations in 2011 and 2012: 

Table 6: Insurers' Median PPACA Medical Loss Ratios (MLRs) in 2011, by 
State and Insurance Market: 

Table 7: Insurers' Median PPACA Medical Loss Ratios (MLRs) in 2012, by 
State and Insurance Market: 

Table 8: Insurers' Spending as Percent of Net Premiums in 2011 by 
State, for all Markets Combined: 

Table 9: Insurers' Spending as Percent of Net Premiums in 2012 by 
State, for all Markets Combined: 

Table 10: Total Amount of PPACA Medical Loss Ratio Rebates Insurers 
Paid to Enrollees and Policyholders in 2011, by State and Insurance 
Market: 

Table 11: Total Amount of PPACA Medical Loss Ratio Rebates Insurers 
Paid to Enrollees and Policyholders in 2012, by State and Insurance 
Market: 

Table 12: Amount of Rebates Insurers Would Have Paid to Enrollees and 
Policyholders with Agents' and Brokers' Commissions and Fees Excluded 
from PPACA Medical Loss Ratio and Rebate Calculations Compared to 
Actual Amount of Rebates Insurers Paid in 2011 by State, for all 
Markets Combined: 

Table 13: Amount of Rebates Insurers Would Have Paid to Enrollees and 
Policyholders with Agents' and Brokers' Commissions and Fees Excluded 
from PPACA Medical Loss Ratio and Rebate Calculations Compared to 
Actual Amount of Rebates Insurers Paid in 2012 by State, for all 
Markets Combined: 

Figures: 

Figure 1: PPACA Medical Loss Ratio (MLR) Formula: 

Figure 2: PPACA Medical Loss Ratio (MLR) Rebate Formula: 

Abbreviations: 

CMS: Centers for Medicare & Medicaid Services: 

HHS: Department of Health and Human Services: 

MLR: medical loss ratio: 

PPACA: Patient Protection and Affordable Care Act: 

QI: quality improvement: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

July 10, 2014: 

The Honorable John D. Rockefeller IV: 
Chairman: 
Committee on Commerce, Science, and Transportation: 
United States Senate: 

Dear Mr. Chairman: 

The Patient Protection and Affordable Care Act (PPACA) established 
federal minimum medical loss ratio (MLR) standards for private 
insurers.[Footnote 1] An MLR serves as a basic financial indicator, 
expressing the percent of premiums that insurers spend on their 
enrollees' medical claims and quality initiatives, as opposed to 
administrative expenses or "non-claims" costs.[Footnote 2] The greater 
the share of enrollees' premiums spent on medical claims and quality 
initiatives, the higher the MLR. These minimum MLR standards are 
intended to help ensure that individuals covered under private health 
insurance plans (enrollees) receive adequate value for their premiums 
and to create incentives for insurers to become more efficient in 
their operations. If minimum PPACA MLR standards are not met, then 
insurers are required to pay rebates back to their enrollees. Insurers 
were required to begin paying rebates under PPACA based on their 
experience in 2011. In that year, approximately 80 million individuals 
were enrolled in plans sold by insurers that were subject to these 
PPACA MLR provisions, according to the Centers for Medicare & Medicaid 
Services (CMS).[Footnote 3] 

PPACA MLR provisions require insurers to calculate separate MLRs for 
their expenditure of premiums for each market (large group, small 
group, and individual) in each state in which they do business, and 
require higher minimum MLR standards for plans sold in the large group 
market than for plans sold in the small group and individual markets. 
[Footnote 4] CMS oversees the MLR standards and issues regulations to 
identify insurers' expenses that are to be counted as claims and 
quality improvement activities, as well as non-claims costs.[Footnote 
5] For example, marketing expenses and spending on agents' and 
brokers' commissions and fees are counted as non-claims costs. 
[Footnote 6] 

There has been debate among health insurance industry stakeholders 
about the effects of the PPACA MLR requirements--including the 
requirement that insurers count agent and broker compensation as a non-
claims cost--on consumers, insurers, and agents and brokers. For 
example, while insurance industry representatives have expressed 
concern that the requirements could result in insurers leaving certain 
markets in some states, causing instability in those markets, consumer 
advocates and others have asserted that the requirements have resulted 
in greater transparency for enrollees regarding how insurers are using 
their premiums. In addition, the agent and broker industry and others 
have raised concerns that counting agent and broker compensation as a 
non-claims cost in calculating the MLR could cause insurers to 
decrease that compensation, which could reduce the availability of 
agents and brokers to assist consumers in choosing a health plan to 
meet their needs.[Footnote 7] Some groups advocating for consumers, 
however, believe that counting agent and broker compensation as a non-
claims cost provides an appropriate incentive for insurers to reduce 
such costs while not unduly impacting the ability of agents and 
brokers to assist consumers. 

You asked us to review the effects of the PPACA MLR requirements on 
enrollees and insurers as well as how excluding agents' and brokers' 
commissions and fees from the MLR would affect the rebates that 
insurers pay.[Footnote 8] In this report, we (1) examine the extent to 
which insurers met the PPACA MLR standards in 2011 and 2012, and how 
much they spent on the PPACA MLR components of medical claims, quality 
improvement activities, and non-claims costs; (2) examine the amount 
of rebates insurers paid in 2011 and 2012 as a result of the PPACA MLR 
requirements, and how this amount would have changed with agents' and 
brokers' commissions and fees excluded from the PPACA MLR and rebate 
calculations; and (3) describe the perspectives of insurers on the 
effects of the PPACA MLR requirements on their business practices. 

To examine the extent to which insurers met the PPACA MLR standards in 
2011 and 2012, and how much they spent on the MLR components of 
medical claims, quality improvement activities, and non-claims costs, 
we analyzed the 2011 and 2012 MLR data that insurers reported to CMS. 
[Footnote 9] We analyzed the 2011 and 2012 MLR data because the PPACA 
MLR reporting and rebate requirements began in 2011 and the 2012 data 
were the most recently available data at the time of our analysis. We 
also used these data to analyze insurers' median MLRs and the percent 
of insurers who met or exceeded the minimum MLR standards, by 
insurance market, year, and state. We analyzed how much insurers spent 
on the MLR components of medical claims, quality improvement 
activities, and non-claims costs, by insurance market, year, and 
state. Within the non-claims costs component of the MLR, we analyzed 
insurers' spending, including on agents' and brokers' fees and 
commissions as well as general administrative expenses, such as 
marketing and staff salaries. We also examined the amount remaining 
after subtracting from premiums (less taxes and fees) the costs 
associated with medical claims and quality improvement activities as 
well as non-claims costs. Throughout this report we refer to this 
amount as insurers' premium surplus.[Footnote 10] We reviewed the MLR 
data for reasonableness and consistency, including screening for 
outliers. We also reviewed documentation about the MLR data and spoke 
with CMS officials about steps taken to ensure data reliability. Based 
on this review, we determined that the data used in this report were 
sufficiently reliable for our purposes. 

To examine the amount of rebates insurers paid based on their 
experience in 2011 and 2012 as a result of the PPACA MLR requirements, 
and how this amount would have changed with agents' and brokers' 
commissions and fees excluded from the MLR and rebate calculations, we 
similarly analyzed the 2011 and 2012 MLR data that insurers reported 
to CMS. We used these data to analyze the amount of rebates that 
insurers paid by insurance market, year, and state. We also used these 
data to calculate the amount of rebates insurers would have owed if 
the commissions and fees that insurers paid to agents and brokers were 
not counted as a non-claims cost in calculating the MLR in each year, 
assuming no other changes in insurers' business practices in response 
to this different method of calculating the MLR. To perform this 
calculation, we subtracted the amount of commissions and fees that 
insurers paid to agents and brokers who are not employed by insurers 
from the MLR formula and recalculated the amount of rebates that 
insurers would have owed as a result.[Footnote 11] We conducted all of 
these analyses by insurance market, year, and state. 

To describe the perspectives of insurers on the effects of the PPACA 
MLR requirements on their business practices, we interviewed eight 
insurers.[Footnote 12] We selected insurers to achieve variation in 
size, as determined by the number of their enrollees; the 
concentration of their health insurance business within the individual 
market; whether they paid rebates based on their experience in 2011 or 
2012; the number of states in which they operated; and their not-for-
profit status.[Footnote 13] In 2012, one of the eight insurers we 
interviewed operated in all 50 states and had about 2 million 
enrollees, three each operated in between 4 and 13 states and had 
between approximately 1 and 7 million enrollees, and the remaining 
four operated in either 1 or 2 states and each had between 
approximately 70,000 and 675,000 enrollees. We used a structured 
interview protocol to gather consistent information from insurers 
about their perspectives on the effects of the PPACA MLR requirements 
on their business practices, including the payment of agents and 
brokers, premium rates, quality improvement activities, and decisions 
to leave any insurance markets.[Footnote 14] Our findings are limited 
to those insurers we spoke with and are not representative of the 
perspectives across all of the insurers reporting MLR data to CMS. 

We conducted this performance audit from October 2013 to July 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings based on our audit objectives. 

Background: 

Under the PPACA MLR requirements, private insurers must report 
annually to CMS their MLRs by each state and insurance market in which 
they operate, as well as the dollar amounts for the components that 
make up their MLRs, such as premiums. Insurers must pay rebates when 
their MLRs do not meet or exceed the minimum applicable PPACA MLR 
standards. Agents and brokers sell insurers' plans to individuals and 
employers and assist individuals and employers in various ways. 

PPACA MLR Reporting Requirements: 

PPACA requires that private insurers offering group or individual 
health insurance coverage report annually on the various components 
that are used to calculate their PPACA MLRs, and each of these 
components must be reported by state and by market.[Footnote 15] 
Private insurers first reported this information in 2012, based on 
their 2011 experience. The markets include large group, small group, 
and individual. Large and small group employers are defined by the 
number of their employees. Prior to PPACA, a small employer was 
defined in federal law as having a maximum of 50 employees. From the 
time PPACA was passed in 2010 until 2016, PPACA gives states the 
option of continuing to define a small group employer as having 50 or 
fewer employees, but starting in 2016, they must define small 
employers as having from 1 to 100 employees.[Footnote 16] The 
individual market includes policies sold by insurers directly to 
individuals. Insurers report their MLR data to CMS by entering 
information on a standardized form that includes multiple data fields 
that make up the MLR and rebate formulas. 

The MLR data that insurers report to CMS include the following 
components, as required by law. 

* Medical claims. These include claims paid and incurred for clinical 
services and supplies provided to enrollees by physicians and other 
clinical providers.[Footnote 17] 

* Expenses for quality improvement (QI) activities. These include 
expenses for activities that are designed to increase the likelihood 
of desired health outcomes in ways that can be objectively measured. 
The activities must be primarily designed to (1) improve health 
outcomes; (2) prevent hospital readmissions; (3) improve patient 
safety, reduce medical errors, and lower infection and mortality 
rates; or (4) implement, promote and increase wellness and health 
activities. Insurers are also allowed to include expenses for health 
information technology required to accomplish these activities as well 
as a percentage of their expenses for converting disease 
classification codes.[Footnote 18] 

* Premiums. These include the sum of all funds paid by an enrollee and 
employer, if applicable, as a condition of receiving coverage from the 
insurer. These also include any fees or other contributions associated 
with the health plan. 

* Federal and state taxes and licensing or regulatory fees. These 
include federal income taxes, assessments, state insurance, premium 
and other taxes, and regulatory authority licenses and fees. Federal 
income taxes on investment income and capital gains are excluded. 

* Non-claims costs. These include all other insurer expenses--those 
beyond medical claims, expenses for QI activities, and federal and 
state taxes and licensing or regulatory fees. CMS defines non-claims 
costs for the following categories: (1) agents' and brokers' fees and 
commissions; (2) cost containment expenses, which reduce the number of 
health services provided or the costs of such services, but are not 
related to an activity to improve health care quality; (3) claims 
adjustment expenses, such as office maintenance and supplies costs, 
not classified as cost containment expenses; (4) salaries and benefits 
that insurers pay to their employees who sell their plans;[Footnote 
19] (5) other taxes that may not be excluded from premium revenue; (6) 
other general and administrative expenses, such as salaries and 
advertising; and (7) community benefit expenditures, which include 
expenses for activities such as health educational campaigns that are 
available broadly to the public.[Footnote 20] 

The remaining amount of premiums that an insurer does not spend on the 
components of medical claims, QI activities, taxes and fees, and non-
claims costs, will be referred to as the insurer's "premium surplus" 
in this report. Premium surplus includes profit and other reserved 
capital. 

PPACA MLR and Rebate Formulas: 

The PPACA MLR is generally calculated by dividing (a) the sum of an 
insurer's medical claims and expenses for QI activities (the formula 
numerator) by (b) the insurer's premiums, after excluding from them 
the amount of insurer's federal and state taxes and licensing or 
regulatory fees (the formula denominator).[Footnote 21] (See figure 1.) 

Figure 1: PPACA Medical Loss Ratio (MLR) Formula: 

[Refer to PDF for image: illustrated formula] 

PPACA MLR equals: 

Medical claims plus Expenses for activities that improve
health care quality; 

divided by: 

Premiums minus Federal and state taxes and licensing or regulatory 
fees. 

Source: GAO. GAO-14-580. 

[End of figure] 

Some insurers, such as those with a small number of enrollees, are 
permitted certain adjustments to their MLRs. These adjustments are 
referred to as credibility adjustments, and they are added to, and 
thus increase, the insurer's MLR.[Footnote 22] Credibility adjustments 
are provided to address the unreliability associated with calculating 
an MLR based on a small number of enrollees. 

Insurers with a small number of enrollees calculated their MLRs for 
2012 based on their 2011 and 2012 experience combined.[Footnote 23] 
All insurers will calculate their MLRs for their experience in 2013 
and subsequent years based on data from a 3-year period. That is, 
insurers will add their data for the year for which the MLR is being 
calculated to their MLR data for the 2 prior years. 

For each insurer, separate MLRs are calculated for each state and 
market combination in which it does business and each MLR is used to 
determine whether an insurer must pay rebates. Insurers must meet a 
minimum PPACA MLR standard, generally 80 percent for the individual 
and small group markets and 85 percent for the large group market, 
with some exceptions. Specifically, the applicable PPACA minimum MLR 
standard is based on one of the following: 

* 85 percent in the large group market, 80 percent in the small group 
market, and 80 percent in the individual market; 

* a higher MLR standard if specified by law in the state in which the 
insurer operates; or: 

* a Department of Health and Human Services (HHS)-approved, adjusted 
MLR standard for a particular state's individual market.[Footnote 24] 

When an insurer's PPACA MLR is lower than the applicable PPACA MLR 
standard, the insurer must pay a rebate. The rebate amount is based on 
the PPACA MLR rebate formula, as shown in figure 2. The difference 
between the applicable PPACA MLR standard and the insurer's MLR is 
calculated and this difference is multiplied by the insurer's 
premiums, after federal and state taxes and licensing or regulatory 
fees are removed. 

Figure 2: PPACA Medical Loss Ratio (MLR) Rebate Formula: 

[Refer to PDF for image: illustrated formula] 

Insurer's total rebate amount equals: 

Applicable PPACA MLR standard minus Insurer's PPACA MLR; 

multiplied by: 

Premiums minus Federal and state taxes and licensing or regulatory 
fees. 

Source: GAO. GAO-14-580. 

[End of figure] 

There are different ways in which rebates can be paid out by insurers 
that depend, in part, on whether rebates are associated with 
individual or group market plans. In general, insurers can choose to 
provide rebates in the form of a lump-sum payment or as a premium 
credit for the following MLR year. Insurers in the individual market 
must provide rebates to their enrollees while insurers in the small 
and large group markets may meet this obligation by providing rebates 
to group policyholders, for example, employers. In turn, group 
policyholders are responsible for allocating the amount of rebate that 
is proportionate to the total amount of premium paid by enrollees and 
may retain part of the rebate based on the amount of premium that they 
contributed. 

The Role of, and Insurer Payments to, Agents and Brokers: 

Agents and brokers sell plans for insurers and perform a variety of 
functions on behalf of individuals and employers. According to the 
Bureau of Labor Statistics, in 2012 there were approximately 337,000 
jobs held by insurance sales agents, which include agents and brokers 
working independently as well as those who are employed by an insurer. 
[Footnote 25] Agents and brokers provide assistance to individuals and 
employers in choosing and enrolling in plans. For example, they may 
assess an individual's insurance needs and describe the 
characteristics of different plans that best meet those needs. Agents 
and brokers may also provide assistance after an individual or 
employee has enrolled in a plan, for example, by helping enrollees 
communicate with health plans in trying to resolve disputed medical 
claims or adding a new family member to a current plan. Insurers who 
use agents and brokers to sell their plans typically pay them based on 
a percentage of the plan's premium or as a flat fee, for example, 
determined by the number of enrollees in the plan.[Footnote 26] 

Most Insurers Met or Exceeded the PPACA MLR Standards in 2011 and in 
2012, and Insurers' Spending on the MLR Components Varied by Market: 

More than three quarters of insurers met or exceeded the minimum PPACA 
MLR standards in 2011 and in 2012, the median PPACA MLRs for all 
insurers were about 88 percent in each year, and there was variation 
across insurance markets. Insurers' spending on enrollees' medical 
claims and non-claims costs as a percentage of premiums varied across 
insurance markets in 2011 and 2012. 

Most Insurers Met or Exceeded the PPACA MLR Standards in 2011 and in 
2012 and Median PPACA MLRs among All Insurers Were 88 Percent: 

Most insurers met or exceeded the PPACA MLR standards established for 
the markets and state in which they operated, but group market 
insurers were more likely to meet or exceed the standards than 
individual market insurers.[Footnote 27] In 2011, about 76 percent of 
insurers met or exceeded the minimum PPACA MLR standards and, in 2012, 
79 percent of insurers met or exceeded the standards. As an example of 
variation across the markets, in 2012 about 86 percent of insurers in 
the large group market and 81 percent of insurers in the small group 
market met or exceeded the MLR standards, compared to 70 percent of 
individual market insurers. 

The median PPACA MLRs in 2011 and in 2012 among all insurers were 
about 88 percent, and the median for the large group market was higher 
than that of the small group and individual markets. For example, in 
2012 the median PPACA MLR for insurers in the large group market was 
about 91 percent compared to 86 percent in the individual market and 
85 percent in the small group market. (See table 1.) We observed that 
insurers' median PPACA MLRs slightly increased from 2011 to 2012 and 
the percent of all insurers meeting or exceeding the standards 
increased by about 3 percentage points. However, these 2 years of data 
may not reflect future patterns in MLRs. (See appendix I for a listing 
of the PPACA MLRs in each state for 2011 and 2012.) 

Table 1: The Percent of Insurers that Met or Exceeded the PPACA 
Medical Loss Ratio (MLR) Standards and Insurers' Median PPACA MLRs in 
2011 and in 2012, by Insurance Market: 

Individual market; 
2011: 
Percent of insurers that met or exceeded the MLR standard: 65.1%; 
Median MLR: 84.0%; 
2012: 
Percent of insurers that met or exceeded the MLR standard: 69.7%; 
Median MLR: 85.8%. 

Small group market; 
2011: 
Percent of insurers that met or exceeded the MLR standard: 79.7%; 
Median MLR: 84.5%; 
2012: 
Percent of insurers that met or exceeded the MLR standard: 81.2%; 
Median MLR: 85.1%. 

Large group market; 
2011: 
Percent of insurers that met or exceeded the MLR standard: 83.7%; 
Median MLR: 90.3%; 
2012: 
Percent of insurers that met or exceeded the MLR standard: 86.2%; 
Median MLR: 90.7%. 

All markets; 
2011: 
Percent of insurers that met or exceeded the MLR standard: 76.4%; 
Median MLR: 87.5%; 
2012: 
Percent of insurers that met or exceeded the MLR standard: 79.1%; 
Median MLR: 88.0%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Notes: Some insurers operate in multiple markets and multiple states. 
A separate MLR is reported for each insurer, market, and state 
combination. 

[End of table] 

The Percentage of Premiums Insurers Spent on Medical Claims and Non-
Claims Costs in 2011 and 2012 Varied by Market: 

In 2011 and 2012, the percentage of net premiums that insurers spent 
on their enrollees' medical claims varied across insurance markets. 
[Footnote 28] Specifically, insurers in the large group market spent a 
higher percent of their net premiums on medical claims in both years 
compared to insurers in the small group and individual markets. For 
example, in 2012 insurers in the large group market spent about 89 
percent of their net premiums on medical claims compared to the 85 
percent that individual market insurers spent and the 84 percent that 
small group market insurers spent. 

Our analysis of the data showed that for the other components of the 
MLR formula--non-claims costs, premium surplus and QI expenses--there 
was more of a mix in variation across markets. We found that insurers' 
spending on non-claims costs as a percent of their net premiums varied 
by insurance market, with insurers in the individual and small group 
markets spending more than insurers in the large group market on non-
claims costs in 2011 and in 2012. For example, in 2012 insurers in the 
individual market spent about 16 percent of their net premiums on non-
claims costs compared to the 7 percent that large group insurers 
spent. With regard to premium surplus, our analysis showed that there 
was also variation across the insurance markets in 2011 and in 2012, 
with insurers in the individual market having less premium surplus 
than insurers in both the small and large group markets.[Footnote 29] 
An insurer's premium surplus includes profit and other reserved 
capital but does not account for any PPACA MLR rebates the insurer may 
have to pay to enrollees.[Footnote 30] Insurers' spending on QI 
expenses did not vary across markets as insurers in each market spent 
about 1 percent of net premiums on QI expenses in 2011 and in 2012. 
(See table 2.) While our analysis showed that from 2011 to 2012 there 
were some shifts in the percentage of spending on these different 
components among the different markets and among all insurers, these 
two years of data may not reflect future patterns in spending. (See 
app. II for a listing of insurers' spending on the MLR components by 
state for 2011 and 2012.) 

Table 2: Insurers' Spending as a Percent of Net Premiums[A] in 2011 
and 2012, by Insurance Market: 

2011: 

Individual; 
Medical claims: 82.5%; 
Non-claims costs: 16.1%; 
Premium surplus[B]: 0.7%; 
Quality improvement expenses: 0.8%; 
Total: 100%. 

Small group; 
Medical claims: 82.8%; 
Non-claims costs: 12.4%; 
Premium surplus[B]: 3.9%; 
Quality improvement expenses: 0.8%; 
Total: 100%. 

Large group; 
Medical claims: 88.8%; 
Non-claims costs: 7.6%; 
Premium surplus[B]: 2.9%; 
Quality improvement expenses: 0.7%; 
Total: 100%. 

All markets; 
Medical claims: 86.7%; 
Non-claims costs: 9.6%; 
Premium surplus[B]: 3.0%; 
Quality improvement expenses: 0.7%; 
Total: 100%. 

2012: 

Individual; 
Medical claims: 84.7%; 
Non-claims costs: 15.5%; 
Premium surplus[B]: -1.1%; 
Quality improvement expenses: 0.9%; 
Total: 100%. 

Small group; 
Medical claims: 83.5%; 
Non-claims costs: 11.9%; 
Premium surplus[B]: 3.7%; 
Quality improvement expenses: 0.9%; 
Total: 100%. 

Large group; 
Medical claims: 89.1%; 
Non-claims costs: 7.4%; 
Premium surplus[B]: 2.7%; 
Quality improvement expenses: 0.8%; 
Total: 100%. 

All markets; 
Medical claims: 87.3%; 
Non-claims costs: 9.3%; 
Premium surplus[B]: 2.6%; 
Quality improvement expenses: 0.8%; 
Total: 100%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Note: For each market, we calculated sums for insurers' spending on 
medical claims, non-claims costs, premium surplus, as well as quality 
improvement expenses. We then divided each by the sum of insurers' net 
premiums in each market. Rows may not sum to 100 due to rounding. 

[A] Net premiums is the amount of insurers' earned premiums after 
subtracting the insurer's federal and state taxes and licensing or 
regulatory fees. Net premiums is the denominator in the PPACA medical 
loss ratio formula. 

[B] The insurer's premium surplus is the amount remaining after 
subtracting from net premiums the costs associated with medical claims 
and quality improvement activities as well as non-claims costs. 

[End of table] 

Three of the six non-claims cost categories generally comprised the 
largest share of insurers' spending, and there was some variation 
across the markets in spending on each of these three categories. 
[Footnote 31] The three categories that made up the largest share of 
insurers' spending on non-claims costs were agents' and brokers' fees 
and commissions, other general expenses, and other claims adjustment 
expenses. We found that insurers' spending on these three categories 
of non-claims costs varied by market. Insurers in the small group 
market spent a higher share on agents' and brokers' fees and 
commissions than insurers in the individual and large group markets. 
For example, in 2012 small group insurers spent about 42 percent of 
their total non-claims costs on agents' and brokers' fees and 
commissions compared to the 23 percent that large group insurers 
spent. In comparison, insurers in the individual and large group 
markets spent a higher share of non-claims costs than insurers in the 
small market on other general expenses, such as salaries, rent, and 
travel; and on other claims adjustment expenses including office and 
computer maintenance. (See table 3.) 

Table 3: Insurers' Spending on Agents' and Brokers' Fees and 
Commissions and Other Categories of Non-Claims Costs as a Percent of 
Total Non-Claims Costs in 2011 and 2012, by Insurance Market: 

2011: 

Individual; 
Agents' and brokers' fees and commissions[A]: 29.8%; 
Other general expenses[B]: 43.2%; 
Other claims adjustment expenses[C]: 14.0%; 
Cost containment expenses[D]: 6.8%; 
Direct sales' salaries and benefits[E]: 6.1%; 
Other Taxes[F]: 0.1%; 
Total: 100%. 

Small group; 
Agents' and brokers' fees and commissions[A]: 40.9%; 
Other general expenses[B]: 34.2%; 
Other claims adjustment expenses[C]: 12.1%; 
Cost containment expenses[D]: 6.6%; 
Direct sales' salaries and benefits[E]: 6.0%; 
Other Taxes[F]: 0.2%; 
Total: 100%. 

Large group; 
Agents' and brokers' fees and commissions[A]: 23.0%; 
Other general expenses[B]: 43.9%; 
Other claims adjustment expenses[C]: 17.3%; 
Cost containment expenses[D]: 8.4%; 
Direct sales' salaries and benefits[E]: 6.9%; 
Other Taxes[F]: 0.5%; 
Total: 100%. 

All markets; 
Agents' and brokers' fees and commissions[A]: 29.8%; 
Other general expenses[B]: 40.7%; 
Other claims adjustment expenses[C]: 15.1%; 
Cost containment expenses[D]: 7.6%; 
Direct sales' salaries and benefits[E]: 6.5%; 
Other Taxes[F]: 0.3%; 
Total: 100%. 

2012: 

Individual; 
Agents' and brokers' fees and commissions[A]: 28.1%; 
Other general expenses[B]: 45.1%; 
Other claims adjustment expenses[C]: 13.8%; 
Cost containment expenses[D]: 7.2%; 
Direct sales' salaries and benefits[E]: 5.7%; 
Other Taxes[F]: 0.1%; 
Total: 100%. 

Small group; 
Agents' and brokers' fees and commissions[A]: 42.2%; 
Other general expenses[B]: 31.8%; 
Other claims adjustment expenses[C]: 11.8%; 
Cost containment expenses[D]: 7.2%; 
Direct sales' salaries and benefits[E]: 6.5%; 
Other Taxes[F]: 0.4%; 
Total: 100%. 

Large group; 
Agents' and brokers' fees and commissions[A]: 23.1%; 
Other general expenses[B]: 42.9%; 
Other claims adjustment expenses[C]: 16.6%; 
Cost containment expenses[D]: 9.5%; 
Direct sales' salaries and benefits[E]: 7.2%; 
Other Taxes[F]: 0.8%; 
Total: 100%. 

All markets; 
Agents' and brokers' fees and commissions[A]: 29.9%; 
Other general expenses[B]: 39.8%; 
Other claims adjustment expenses[C]: 14.6%; 
Cost containment expenses[D]: 8.4%; 
Direct sales' salaries and benefits[E]: 6.8%; 
Other Taxes[F]: 0.5%; 
Total: 100%. 

Source: GAO analysis of CMS data. GAO-14-580. 

[A] Agents' and brokers' fees and commissions include all expenses 
paid to agents and brokers, who are not employees of the insurer, for 
the sale and solicitation of the insurer's policies. 

[B] Insurers' other general and administrative expenses include 
salaries, accreditation and certification fees, rent, legal fees and 
expenses, travel, advertising and utilities. 

[C] Insurers' other claims adjustment expenses include costs such as 
office maintenance, computer maintenance, maintenance of records, and 
general clerical and secretarial costs. 

[D] Cost containment expenses includes expenses that reduce the number 
of health services provided or the cost of such services. 

[E] Direct sales' salaries and benefits include compensation to 
employees of insurers who sell their plans. 

[F] Other taxes include state sales taxes and any other taxes that 
have not been removed from the medical loss ratio denominator. 

[End of table] 

Insurers Paid $1.1 Billion in Rebates in 2011 and $520 Million in 
2012, and Would Have Paid About 75 Percent Less with Agents' and 
Brokers' Fees and Commissions Excluded, Absent Other Changes in 
Business Practices: 

Insurers paid about $1.1 billion in total rebates to enrollees and 
policyholders who paid premiums in 2011, the first year that insurers 
were subject to the PPACA MLR requirements, and about $520 million in 
rebates in 2012. These amounts would each have decreased by about 75 
percent had agents' and brokers' fees and commissions been excluded 
from the MLR and rebate calculations, assuming insurers made no other 
changes that could affect their MLRs. Of the $1.1 billion in total 
rebates that insurers paid in 2011, insurers in the large group market 
paid 37 percent of this total, or $405 million in rebates, the largest 
amount across the three insurance markets.[Footnote 32] Of the $520 
million in total rebates that insurers paid in 2012, insurers in the 
small group market paid the largest amount in rebates (about $207 
million). (See appendix III for a listing of the rebate amounts that 
insurers paid in each state for 2011 and 2012.) 

We found that the average rebate amounts insurers paid per enrollee 
and the likelihood that insurers paid rebates varied by insurance 
market.[Footnote 33] Insurers across the three markets paid an average 
rebate of $83.60 per enrollee in 2011 and $58.50 per enrollee in 2012. 
Rebate amounts varied by insurance market each year, and individual 
and small group insurers paid higher per-enrollee rebates compared to 
insurers in the large group market. To illustrate, individual market 
insurers paid an average rebate of $68.30 per enrollee in 2012 
compared to the average rebate of $39.20 that insurers in the large 
group market paid. In both 2011 and 2012, insurers in the individual 
market were more likely to pay rebates than insurers in the small and 
large group markets. For example, in 2012 about 30 percent of 
individual market insurers paid rebates and about 14 percent of large 
group insurers did so. The total and average rebate amounts that 
insurers paid decreased from 2011 to 2012 overall and within each 
market, with the greatest decrease occurring in the large group 
market. (See table 4.) However, these two years of data may not 
reflect future rebate patterns.[Footnote 34] 

Table 4: Amount of PPACA Medical Loss Ratio (MLR) Rebates Insurers 
Paid to Enrollees and Policyholders and Percent of Insurers That Paid 
Rebates in 2011 and 2012, by Insurance Market: 

2011: 

Individual; 
Total amount of rebates: $400.8 million; 
Average rebate amount per enrollee[A]: $95.3; 
Percent of insurers who paid rebates: 34.9%. 

Small group; 
Total amount of rebates: $296.1 million; 
Average rebate amount per enrollee[A]: $90.6; 
Percent of insurers who paid rebates: 20.3%. 

Large group; 
Total amount of rebates: $405.0 million; 
Average rebate amount per enrollee[A]: $71.0; 
Percent of insurers who paid rebates: 16.3%. 

Total; 
Total amount of rebates: $1.102 billion; 
Average rebate amount per enrollee[A]: $83.6; 
Percent of insurers who paid rebates: 23.6%. 

2012: 

Individual; 
Total amount of rebates: $201.1 million; 
Average rebate amount per enrollee[A]: $68.3; 
Percent of insurers who paid rebates: 30.1%. 

Small group; 
Total amount of rebates: $206.9 million; 
Average rebate amount per enrollee[A]: $67.0; 
Percent of insurers who paid rebates: 18.6%. 

Large group; 
Total amount of rebates: $112.1 million; 
Average rebate amount per enrollee[A]: $39.2; 
Percent of insurers who paid rebates: 13.7%. 

Total; 
Total amount of rebates: $520.1 million; 
Average rebate amount per enrollee[A]: $58.5; 
Percent of insurers who paid rebates: 20.8%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Note: Some insurers operate in multiple markets and states. A separate 
MLR and rebate amount, if applicable, is reported for each insurer, 
market, and state combination. 

[A] The average rebate amount is the total amount of rebates insurers 
paid divided by the total number of individuals (including dependents) 
enrolled in their plans. 

[End of table] 

Our analysis of the data showed that rebates would have been reduced 
by about 75 percent if agents' and brokers' fees and commissions were 
excluded from the MLR and rebate calculations.[Footnote 35] 
Specifically, we found that the rebates paid by insurers to enrollees 
and policyholders who paid premiums in 2011 would have fallen from 
$1.1 billion to about $272 million, and in 2012 would have fallen from 
$520 million to about $135 million.[Footnote 36] There was variation 
in the impact of the recalculated MLRs across the three markets. For 
example, in both years, the differences between the actual and 
recalculated rebate amounts were greater, on a percentage basis, in 
the small group market compared to the individual market. (See table 
5.) These rebate calculations are based on the assumption that 
insurers did not make other changes during this time that would have 
affected their MLRs. However, if the formula had been different, 
insurers might have made different business decisions in those 
years.[Footnote 37] (See appendix IV for a listing of the rebate 
amounts that insurers would have paid with agents' and brokers' 
commissions and fees excluded from the MLRs in each state for 2011 and 
2012.) 

Table 5: Amount of Rebates Insurers Would Have Paid to Enrollees and 
Policyholders with Agents' and Brokers' Commissions and Fees Excluded 
from PPACA Medical Loss Ratio and Rebate Calculations in 2011 and 2012: 

2011: 

Individual; 
Total amount of rebates: $400.8 million; 
Amount of rebates with agent and broker compensation excluded: $119.1 
million; 
Difference: -70.3%. 

Small group; 
Total amount of rebates: $296.1 million; 
Amount of rebates with agent and broker compensation excluded: $26.6 
million; 
Difference: -91.0%. 

Large group; 
Total amount of rebates: $405.0 million; 
Amount of rebates with agent and broker compensation excluded: $126.0 
million; 
Difference: -68.9%. 

Total; 
Total amount of rebates: $1.102 billion; 
Amount of rebates with agent and broker compensation excluded: $271.7 
million; 
Difference: -75.3%. 

2012: 

Individual; 
Total amount of rebates: $201.1 million; 
Amount of rebates with agent and broker compensation excluded: $64.2 
million; 
Difference: -68.1%. 

Small group; 
Total amount of rebates: $206.9 million; 
Amount of rebates with agent and broker compensation excluded: $45.0 
million; 
Difference: -78.3%. 

Large group; 
Total amount of rebates: $112.1 million; 
Amount of rebates with agent and broker compensation excluded: $26.1 
million; 
Difference: -76.7%. 

Total; 
Total amount of rebates: $520.1 million; 
Amount of rebates with agent and broker compensation excluded: $135.3 
million; 
Difference: -74.0%. 

Source: GAO analysis of CMS data. GAO-14-580. 

[End of table] 

Most Insurers We Interviewed Reported Factors Other than PPACA MLR 
Requirements as Affecting their Business Practices: 

All eight insurers that we interviewed reported that they increased 
their premium rates since 2011 due to a variety of factors, and most 
(five of the eight) reported that the factors were largely unrelated 
to PPACA MLR requirements. Key factors cited for making premium 
changes included: trends in medical claims, competition with other 
insurers, the PPACA requirements that insurers offer their plans on a 
guaranteed-issue basis as well as provide essential health benefits in 
their plans,[Footnote 38] and the per-capita fees associated with 
PPACA's reinsurance program.[Footnote 39] For example, one insurer 
that has increased premiums in the individual market since 2011 stated 
that its increased premiums were due in part to the increased costs 
that the insurer told us was associated with it providing coverage on 
a guaranteed-issue basis, as mandated under PPACA.[Footnote 40] Three 
of the eight insurers reported that the PPACA MLR requirements were 
one factor among a variety of factors that influenced their decisions 
regarding premium rates, and two of these insurers told us that the 
MLR requirements have generally moderated their premium increases. For 
example, one insurer that has increased its premium rates in the 
individual market since 2011 stated that without the PPACA MLR 
requirements in place the insurer would have likely increased rates 
further. Another insurer explained that if it does not meet the PPACA 
MLR standards in its planning, it will adjust its premium rate 
increases to avoid the associated expense and administrative work 
required to issue rebates to enrollees. 

Four of the eight insurers we interviewed reported they did not make 
any recent changes to their agents' and brokers' fees and commissions, 
and of the four that did make changes, one reported that the MLR 
requirements were a primary driver behind that decision. All four of 
the insurers who did make changes told us that they have reduced fees 
and commissions in certain markets since 2011 either by changing their 
payment method from a percent of premiums to a flat fee, or by 
reducing the set percentage of premiums that they pay to agents and 
brokers.[Footnote 41] According to one insurer, paying agents and 
brokers on a flat fee basis will help the insurer reduce the fees and 
commissions it pays over time because otherwise the insurer would 
increase such payments every time it increases its premium rates. 
While one of the four insurers stated that the PPACA MLR requirements 
were the primary driver of its decision to reduce agent and broker 
compensation, the other three insurers that also reduced their agent 
and broker compensation cited other influencing factors. For example, 
insurers told us that they reduced such compensation since 2011 
because of the general trend preceding enactment of PPACA to pay 
agents and brokers a flat fee rather than a percentage of premiums. 
According to insurers, this reduction in compensation allows them to 
operate more efficiently by lowering their non-claims costs as well as 
offer more competitive premium rates for their plans. 

All eight insurers we interviewed told us that the PPACA MLR 
requirements have not affected where they do business and have had no 
effect, or a very limited effect, on their spending on QI activities 
since 2011. Two of the eight insurers we interviewed stated that they 
exited certain insurance markets since the PPACA MLR requirements 
began, but they did not attribute those decisions to the MLR 
requirements. For example, one insurer who operated in all 50 states 
told us that it left the individual market in three states in 2014, in 
part because of its concerns in each market over maintaining a 
sufficient network of providers and being able to provide affordable 
coverage. The insurer further explained that a low number of enrollees 
in each market contributed to its decisions to no longer operate in 
the three states. None of the insurers we interviewed reported that 
the PPACA MLR requirements have generally influenced their spending on 
QI activities since 2011, and all eight insurers reported other 
influencing factors, such as customer and employer demand for QI 
programs, competition among insurers, and the goal of improving 
enrollees' health outcomes, which in turn could lower the use and 
costs of health care services. 

Five of the eight insurers we interviewed also commented that the 2013 
PPACA MLR calculation, which is based on a 3-year period including 
2013 and the prior 2 years, will likely reduce some of the effects in 
the MLR formula of year-to-year variability in enrollees' medical 
claims. Variability in medical claims occurs when actual and expected 
medical claims differ, and one source of such variability is the 
effect of large claims. One insurer, who paid rebates in 2011, noted 
that it would not have owed rebates had the MLR formula been based on 
3 years of insurers' experience. In comparison, another insurer told 
us that it will likely owe rebates for 2013 because the MLR data it 
reported in 2011 and 2012 will be averaged into 2013. The insurer 
added that over time, however, it believes the 3-year MLR formula 
should be beneficial for the insurer by reducing the likelihood of 
owing rebates. 

Agency Comments: 

We provided a draft of this product to HHS for comment. HHS responded 
that it had no general or technical comments. 

We are sending copies of this report to the Secretary of Health and 
Human Services and other interested parties. In addition, the report 
is available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff have any questions about this report, please 
contact me at (202) 512-7114 or DickenJ@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. GAO staff who made key contributions 
to this report are listed in appendix V. 

Sincerely yours, 

Signed by: 

John E. Dicken: 
Director, Health Care: 

[End of section] 

Appendix I: PPACA Medical Loss Ratios by State in 2011 and 2012: 

This appendix presents information on insurers' median PPACA medical 
loss ratios by state and insurance market for 2011 (see table 6) and 
for 2012 (see table7). 

Table 6: Insurers' Median PPACA Medical Loss Ratios (MLRs) in 2011, by 
State and Insurance Market: 

State: Alabama; 
Median MLR: 
Individual market[A]: 76.9%; 
Small group market[B]: 87.2%; 
Large group market[C]: 101.8%; 
All Markets: 92.2%. 

State: Alaska; 
Median MLR: 
Individual market[A]: 83.9%; 
Small group market[B]: 88.4%; 
Large group market[C]: 93.1%; 
All Markets: 91.6%. 

State: Arizona; 
Median MLR: 
Individual market[A]: 83.9%; 
Small group market[B]: 80.3%; 
Large group market[C]: 91.2%; 
All Markets: 84.0%. 

State: Arkansas; 
Median MLR: 
Individual market[A]: 81.2%; 
Small group market[B]: 84.4%; 
Large group market[C]: 88.6%; 
All Markets: 85.9%. 

State: California; 
Median MLR: 
Individual market[A]: 81.6%; 
Small group market[B]: 84.2%; 
Large group market[C]: 90.5%; 
All Markets: 87.6%. 

State: Colorado; 
Median MLR: 
Individual market[A]: 90.1%; 
Small group market[B]: 83.5%; 
Large group market[C]: 88.1%; 
All Markets: 87.0%. 

State: Connecticut; 
Median MLR: 
Individual market[A]: 80.7%; 
Small group market[B]: 84.5%; 
Large group market[C]: 87.6%; 
All Markets: 86.6%. 

State: Delaware; 
Median MLR: 
Individual market[A]: 80.6%; 
Small group market[B]: 85.3%; 
Large group market[C]: 90.0%; 
All Markets: 88.6%. 

State: District of Columbia; 
Median MLR: 
Individual market[A]: 102.5%; 
Small group market[B]: 78.1%; 
Large group market[C]: 82.7%; 
All Markets: 82.4%. 

State: Florida; 
Median MLR: 
Individual market[A]: 80.4%; 
Small group market[B]: 85.1%; 
Large group market[C]: 88.1%; 
All Markets: 85.6%. 

State: Georgia; 
Median MLR: 
Individual market[A]: 84.2%; 
Small group market[B]: 83.6%; 
Large group market[C]: 91.1%; 
All Markets: 85.1%. 

State: Hawaii; 
Median MLR: 
Individual market[A]: 94.2%; 
Small group market[B]: 87.5%; 
Large group market[C]: 90.5%; 
All Markets: 89.9%. 

State: Idaho; 
Median MLR: 
Individual market[A]: 89.9%; 
Small group market[B]: 85.5%; 
Large group market[C]: 93.1%; 
All Markets: 90.4%. 

State: Illinois; 
Median MLR: 
Individual market[A]: 82.3%; 
Small group market[B]: 84.1%; 
Large group market[C]: 88.9%; 
All Markets: 86.9%. 

State: Indiana; 
Median MLR: 
Individual market[A]: 83.2%; 
Small group market[B]: 85.6%; 
Large group market[C]: 95.2%; 
All Markets: 87.6%. 

State: Iowa; 
Median MLR: 
Individual market[A]: 84.6%; 
Small group market[B]: 83.8%; 
Large group market[C]: 93.3%; 
All Markets: 87.3%. 

State: Kansas; 
Median MLR: 
Individual market[A]: 79.1%; 
Small group market[B]: 83.5%; 
Large group market[C]: 90.6%; 
All Markets: 87.0%. 

State: Kentucky; 
Median MLR: 
Individual market[A]: 81.5%; 
Small group market[B]: 89.1%; 
Large group market[C]: 91.0%; 
All Markets: 88.1%. 

State: Louisiana; 
Median MLR: 
Individual market[A]: 81.1%; 
Small group market[B]: 82.0%; 
Large group market[C]: 89.9%; 
All Markets: 84.1%. 

State: Maine; 
Median MLR: 
Individual market[A]: 90.3%; 
Small group market[B]: 89.2%; 
Large group market[C]: 88.1%; 
All Markets: 89.0%. 

State: Maryland; 
Median MLR: 
Individual market[A]: 81.8%; 
Small group market[B]: 81.5%; 
Large group market[C]: 85.8%; 
All Markets: 83.9%. 

State: Massachusetts; 
Median MLR: 
Individual market[A]: 90.8%; 
Small group market[B]: 89.1%; 
Large group market[C]: 88.5%; 
All Markets: 89.1%. 

State: Michigan; 
Median MLR: 
Individual market[A]: 82.1%; 
Small group market[B]: 83.6%; 
Large group market[C]: 92.1%; 
All Markets: 86.1%. 

State: Minnesota; 
Median MLR: 
Individual market[A]: 92.0%; 
Small group market[B]: 87.2%; 
Large group market[C]: 92.7%; 
All Markets: 91.3%. 

State: Mississippi; 
Median MLR: 
Individual market[A]: 84.2%; 
Small group market[B]: 87.4%; 
Large group market[C]: 91.2%; 
All Markets: 87.6%. 

State: Missouri; 
Median MLR: 
Individual market[A]: 79.6%; 
Small group market[B]: 82.0%; 
Large group market[C]: 90.1%; 
All Markets: 86.1%. 

State: Montana; 
Median MLR: 
Individual market[A]: 79.0%; 
Small group market[B]: 78.1%; 
Large group market[C]: 94.5%; 
All Markets: 82.0%. 

State: Nebraska; 
Median MLR: 
Individual market[A]: 82.4%; 
Small group market[B]: 81.7%; 
Large group market[C]: 91.9%; 
All Markets: 87.5%. 

State: Nevada; 
Median MLR: 
Individual market[A]: 80.9%; 
Small group market[B]: 81.7%; 
Large group market[C]: 91.1%; 
All Markets: 83.9%. 

State: New Hampshire; 
Median MLR: 
Individual market[A]: 83.5%; 
Small group market[B]: 89.8%; 
Large group market[C]: 91.0%; 
All Markets: 90.6%. 

State: New Jersey; 
Median MLR: 
Individual market[A]: 95.3%; 
Small group market[B]: 85.6%; 
Large group market[C]: 87.0%; 
All Markets: 86.7%. 

State: New Mexico; 
Median MLR: 
Individual market[A]: 87.8%; 
Small group market[B]: 88.3%; 
Large group market[C]: 93.8%; 
All Markets: 92.5%. 

State: New York; 
Median MLR: 
Individual market[A]: 99.2%; 
Small group market[B]: 94.3%; 
Large group market[C]: 87.8%; 
All Markets: 91.0%. 

State: North Carolina; 
Median MLR: 
Individual market[A]: 79.4%; 
Small group market[B]: 82.6%; 
Large group market[C]: 89.5%; 
All Markets: 83.8%. 

State: North Dakota; 
Median MLR: 
Individual market[A]: 85.4%; 
Small group market[B]: 84.5%; 
Large group market[C]: 89.8%; 
All Markets: 87.6%. 

State: Ohio; 
Median MLR: 
Individual market[A]: 95.2%; 
Small group market[B]: 87.7%; 
Large group market[C]: 92.8%; 
All Markets: 90.8%. 

State: Oklahoma; 
Median MLR: 
Individual market[A]: 77.8%; 
Small group market[B]: 81.3%; 
Large group market[C]: 88.4%; 
All Markets: 85.4%. 

State: Oregon; 
Median MLR: 
Individual market[A]: 85.7%; 
Small group market[B]: 85.9%; 
Large group market[C]: 91.9%; 
All Markets: 88.4%. 

State: Pennsylvania; 
Median MLR: 
Individual market[A]: 87.6%; 
Small group market[B]: 86.1%; 
Large group market[C]: 88.4%; 
All Markets: 87.8%. 

State: Rhode Island; 
Median MLR: 
Individual market[A]: 87.0%; 
Small group market[B]: 86.9%; 
Large group market[C]: 92.9%; 
All Markets: 88.0%. 

State: South Carolina; 
Median MLR: 
Individual market[A]: 79.9%; 
Small group market[B]: 78.6%; 
Large group market[C]: 88.7%; 
All Markets: 86.0%. 

State: South Dakota; 
Median MLR: 
Individual market[A]: 86.6%; 
Small group market[B]: 89.5%; 
Large group market[C]: 95.0%; 
All Markets: 89.5%. 

State: Tennessee; 
Median MLR: 
Individual market[A]: 79.7%; 
Small group market[B]: 82.1%; 
Large group market[C]: 89.9%; 
All Markets: 85.5%. 

State: Texas; 
Median MLR: 
Individual market[A]: 84.1%; 
Small group market[B]: 83.4%; 
Large group market[C]: 90.6%; 
All Markets: 88.1%. 

State: Utah; 
Median MLR: 
Individual market[A]: 79.5%; 
Small group market[B]: 84.4%; 
Large group market[C]: 92.3%; 
All Markets: 85.6%. 

State: Vermont; 
Median MLR: 
Individual market[A]: 105.0%; 
Small group market[B]: 89.4%; 
Large group market[C]: 92.8%; 
All Markets: 92.6%. 

State: Virginia; 
Median MLR: 
Individual market[A]: 79.6%; 
Small group market[B]: 81.2%; 
Large group market[C]: 90.7%; 
All Markets: 83.5%. 

State: Washington; 
Median MLR: 
Individual market[A]: 87.4%; 
Small group market[B]: 87.4%; 
Large group market[C]: 90.4%; 
All Markets: 88.0%. 

State: West Virginia; 
Median MLR: 
Individual market[A]: 75.0%; 
Small group market[B]: 83.7%; 
Large group market[C]: 97.5%; 
All Markets: 86.8%. 

State: Wisconsin; 
Median MLR: 
Individual market[A]: 93.8%; 
Small group market[B]: 94.6%; 
Large group market[C]: 94.7%; 
All Markets: 94.6%. 

State: Wyoming; 
Median MLR: 
Individual market[A]: 83.2%; 
Small group market[B]: 87.4%; 
Large group market[C]: 94.8%; 
All Markets: 89.4%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Notes: The PPACA MLR is calculated by dividing (a) the sum of an 
insurer's medical claims and expenses for quality improvement (QI) 
activities by (b) the insurer's premiums, after excluding from them 
the amount of insurer's federal and state taxes and licensing or 
regulatory fees. PPACA MLRs over 100 percent indicate that the 
insurer's claims and QI expenses for a particular market were greater 
than the premiums it collected for that year after excluding the 
applicable taxes and fees. Insurers operating in the insular areas of 
American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and 
United States Virgin Islands were also subject to the PPACA MLR 
requirements. In 2011 HHS granted seven states temporary adjustments 
to the 80 percent MLR standard for the individual market, and each 
state's adjustment allowed for a lower MLR standard. The states were 
Georgia, Iowa, Kentucky, Maine, Nevada, New Hampshire, and North 
Carolina. 

[A] The individual market includes plans sold by insurers directly to 
individuals. 

[B] The small group market includes plans sold by insurers to small 
employers. Prior to PPACA, a small employer was defined in federal law 
as having a maximum of 50 employees. Under PPACA, a small employer is 
defined as having from 1 to 100 employees. In 2011, states had the 
option of continuing to define a small employer as having 50 or fewer 
employees. Starting in 2016, states must define a small employer as 
having from 1 to 100 employees. See Pub. L. No. 111-148, §1304(b), 124 
Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[C] The large group market includes plans sold by insurers to large 
employers. Prior to PPACA, a large employer was defined in federal law 
as having a minimum of 51 employers. Under PPACA, a large employer is 
defined as having 101 or more employees. In 2011, states had the 
option of continuing to define a large employer as having 51 or more 
employees. Starting in 2016, states must define a large employer as 
those having 101 or more employees. See Pub. L. No. 111-148, §1304(b), 
124 Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[End of table] 

Table 7: Insurers' Median PPACA Medical Loss Ratios (MLRs) in 2012, by 
State and Insurance Market: 

State: Alabama; 
Median MLR: 
Individual market[A]: 85.5%; 
Small group market[B]: 86.8%; 
Large group market[C]: 92.2%; 
All Markets: 91.2%. 

State: Alaska; 
Median MLR: 
Individual market[A]: 83.4%; 
Small group market[B]: 82.3%; 
Large group market[C]: 94.0%; 
All Markets: 84.4%. 

State: Arizona; 
Median MLR: 
Individual market[A]: 85.4%; 
Small group market[B]: 79.7%; 
Large group market[C]: 89.6%; 
All Markets: 85.4%. 

State: Arkansas; 
Median MLR: 
Individual market[A]: 82.0%; 
Small group market[B]: 80.9%; 
Large group market[C]: 86.7%; 
All Markets: 83.3%. 

State: California; 
Median MLR: 
Individual market[A]: 83.2%; 
Small group market[B]: 84.2%; 
Large group market[C]: 91.4%; 
All Markets: 89.1%. 

State: Colorado; 
Median MLR: 
Individual market[A]: 89.2%; 
Small group market[B]: 85.4%; 
Large group market[C]: 89.9%; 
All Markets: 88.2%. 

State: Connecticut; 
Median MLR: 
Individual market[A]: 84.9%; 
Small group market[B]: 84.2%; 
Large group market[C]: 88.4%; 
All Markets: 87.3%. 

State: Delaware; 
Median MLR: 
Individual market[A]: 81.4%; 
Small group market[B]: 84.1%; 
Large group market[C]: 89.8%; 
All Markets: 84.1%. 

State: District of Columbia; 
Median MLR: 
Individual market[A]: 106.1%; 
Small group market[B]: 81.3%; 
Large group market[C]: 85.5%; 
All Markets: 84.9%. 

State: Florida; 
Median MLR: 
Individual market[A]: 82.9%; 
Small group market[B]: 85.6%; 
Large group market[C]: 89.2%; 
All Markets: 87.1%. 

State: Georgia; 
Median MLR: 
Individual market[A]: 85.5%; 
Small group market[B]: 83.4%; 
Large group market[C]: 93.0%; 
All Markets: 87.0%. 

State: Hawaii; 
Median MLR: 
Individual market[A]: 95.0%; 
Small group market[B]: 89.1%; 
Large group market[C]: 88.3%; 
All Markets: 90.3%. 

State: Idaho; 
Median MLR: 
Individual market[A]: 86.2%; 
Small group market[B]: 83.5%; 
Large group market[C]: 92.4%; 
All Markets: 89.6%. 

State: Illinois; 
Individual market[A]: 81.6%; 
Small group market[B]: 83.5%; 
Large group market[C]: 90.0%; 
All Markets: 85.2%. 

State: Indiana; 
Median MLR: 
Individual market[A]: 91.8%; 
Small group market[B]: 85.7%; 
Large group market[C]: 92.7%; 
All Markets: 88.4%. 

State: Iowa; 
Median MLR: 
Individual market[A]: 83.6%; 
Small group market[B]: 84.8%; 
Large group market[C]: 92.8%; 
All Markets: 88.2%. 

State: Kansas; 
Median MLR: 
Individual market[A]: 85.1%; 
Small group market[B]: 82.2%; 
Large group market[C]: 91.4%; 
All Markets: 89.2%. 

State: Kentucky; 
Median MLR: 
Individual market[A]: 85.6%; 
Small group market[B]: 88.3%; 
Large group market[C]: 96.4%; 
All Markets: 89.4%. 

State: Louisiana; 
Median MLR: 
Individual market[A]: 81.9%; 
Small group market[B]: 81.9%; 
Large group market[C]: 89.8%; 
All Markets: 85.7%. 

State: Maine; 
Median MLR: 
Individual market[A]: 100.8%; 
Small group market[B]: 85.5%; 
Large group market[C]: 86.3%; 
All Markets: 85.7%. 

State: Maryland; 
Median MLR: 
Individual market[A]: 79.5%; 
Small group market[B]: 83.7%; 
Large group market[C]: 87.0%; 
All Markets: 85.1%. 

State: Massachusetts; 
Median MLR: 
Individual market[A]: 91.5%; 
Small group market[B]: 88.2%; 
Large group market[C]: 89.1%; 
All Markets: 89.7%. 

State: Michigan; 
Median MLR: 
Individual market[A]: 78.7%; 
Small group market[B]: 83.0%; 
Large group market[C]: 91.2%; 
All Markets: 85.9%. 

State: Minnesota; 
Median MLR: 
Individual market[A]: 93.0%; 
Small group market[B]: 90.2%; 
Large group market[C]: 95.3%; 
All Markets: 93.7%. 

State: Mississippi; 
Median MLR: 
Individual market[A]: 86.0%; 
Small group market[B]: 88.4%; 
Large group market[C]: 94.5%; 
All Markets: 89.9%. 

State: Missouri; 
Median MLR: 
Individual market[A]: 82.7%; 
Small group market[B]: 83.0%; 
Large group market[C]: 90.9%; 
All Markets: 88.8%. 

State: Montana; 
Median MLR: 
Individual market[A]: 89.7%; 
Small group market[B]: 82.8%; 
Large group market[C]: 93.8%; 
All Markets: 85.4%. 

State: Nebraska; 
Median MLR: 
Individual market[A]: 85.5%; 
Small group market[B]: 84.8%; 
Large group market[C]: 89.8%; 
All Markets: 86.2%. 

State: Nevada; 
Median MLR: 
Individual market[A]: 85.3%; 
Small group market[B]: 80.8%; 
Large group market[C]: 89.7%; 
All Markets: 85.9%. 

State: New Hampshire; 
Median MLR: 
Individual market[A]: 78.3%; 
Small group market[B]: 88.8%; 
Large group market[C]: 91.0%; 
All Markets: 88.0%. 

State: New Jersey; 
Median MLR: 
Individual market[A]: 109.5%; 
Small group market[B]: 86.8%; 
Large group market[C]: 87.0%; 
All Markets: 87.7%. 

State: New Mexico; 
Median MLR: 
Individual market[A]: 89.3%; 
Small group market[B]: 86.5%; 
Large group market[C]: 93.0%; 
All Markets: 91.5%. 

State: New York; 
Median MLR: 
Individual market[A]: 95.1%; 
Small group market[B]: 93.0%; 
Large group market[C]: 86.9%; 
All Markets: 91.6%. 

State: North Carolina; 
Median MLR: 
Individual market[A]: 81.9%; 
Small group market[B]: 82.2%; 
Large group market[C]: 92.5%; 
All Markets: 84.5%. 

State: North Dakota; 
Median MLR: 
Individual market[A]: 87.5%; 
Small group market[B]: 89.3%; 
Large group market[C]: 93.5%; 
All Markets: 89.3%. 

State: Ohio; 
Median MLR: 
Individual market[A]: 87.9%; 
Small group market[B]: 89.3%; 
Large group market[C]: 94.2%; 
All Markets: 92.2%. 

State: Oklahoma; 
Median MLR: 
Individual market[A]: 78.4%; 
Small group market[B]: 83.8%; 
Large group market[C]: 90.2%; 
All Markets: 86.3%. 

State: Oregon; 
Median MLR: 
Individual market[A]: 90.2%; 
Small group market[B]: 84.7%; 
Large group market[C]: 90.0%; 
All Markets: 88.9%. 

State: Pennsylvania; 
Median MLR: 
Individual market[A]: 94.1%; 
Small group market[B]: 87.8%; 
Large group market[C]: 91.9%; 
All Markets: 89.8%. 

State: Rhode Island; 
Median MLR: 
Individual market[A]: 101.9%; 
Small group market[B]: 86.8%; 
Large group market[C]: 93.7%; 
All Markets: 90.5%. 

State: South Carolina; 
Median MLR: 
Individual market[A]: 84.1%; 
Small group market[B]: 80.5%; 
Large group market[C]: 94.1%; 
All Markets: 86.8%. 

State: South Dakota; 
Median MLR: 
Individual market[A]: 98.5%; 
Small group market[B]: 91.8%; 
Large group market[C]: 92.4%; 
All Markets: 92.2%. 

State: Tennessee; 
Median MLR: 
Individual market[A]: 83.6%; 
Small group market[B]: 82.4%; 
Large group market[C]: 94.4%; 
All Markets: 85.8%. 

State: Texas; 
Median MLR: 
Individual market[A]: 81.7%; 
Small group market[B]: 84.7%; 
Large group market[C]: 89.7%; 
All Markets: 87.0%. 

State: Utah; 
Median MLR: 
Individual market[A]: 82.0%; 
Small group market[B]: 82.5%; 
Large group market[C]: 91.1%; 
All Markets: 86.5%. 

State: Vermont; 
Median MLR: 
Individual market[A]: 108.6%; 
Small group market[B]: 89.7%; 
Large group market[C]: 91.8%; 
All Markets: 92.9%. 

State: Virginia; 
Median MLR: 
Individual market[A]: 83.7%; 
Small group market[B]: 81.1%; 
Large group market[C]: 91.1%; 
All Markets: 86.4%. 

State: Washington; 
Median MLR: 
Individual market[A]: 89.9%; 
Small group market[B]: 86.5%; 
Large group market[C]: 90.9%; 
All Markets: 90.2%. 

State: West Virginia; 
Median MLR: 
Individual market[A]: 77.8%; 
Small group market[B]: 82.8%; 
Large group market[C]: 95.5%; 
All Markets: 86.3%. 

State: Wisconsin; 
Median MLR: 
Individual market[A]: 86.7%; 
Small group market[B]: 92.5%; 
Large group market[C]: 95.4%; 
All Markets: 92.8%. 

State: Wyoming; 
Median MLR: 
Individual market[A]: 84.1%; 
Small group market[B]: 82.4%; 
Large group market[C]: 87.2%; 
All Markets: 83.1%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Notes: The PPACA MLR is calculated by dividing (a) the sum of an 
insurer's medical claims and expenses for quality improvement (QI) 
activities by (b) the insurer's premiums, after excluding from them 
the amount of insurer's federal and state taxes and licensing or 
regulatory fees. PPACA MLRs over 100 percent indicate that the 
insurer's claims and QI expenses for a particular market were greater 
than the premiums it collected for that year after excluding the 
applicable taxes and fees. Insurers operating in the insular areas of 
American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and 
United States Virgin Islands were also subject to the PPACA MLR 
requirements. In 2012 HHS granted four states temporary adjustments to 
the 80 percent MLR standard for the individual market and each state's 
adjustment allowed for a lower MLR standard. The states were Georgia, 
Iowa, Maine, and New Hampshire. 

[A] The individual market includes plans sold by insurers directly to 
individuals. 

[B] The small group market includes plans sold by insurers to small 
employers. Prior to PPACA, a small employer was defined in federal law 
as having a maximum of 50 employees. Under PPACA, a small employer is 
defined as having from 1 to 100 employees. In 2012, states had the 
option of continuing to define a small employer as having 50 or fewer 
employees. Starting in 2016, states must define a small employer as 
having from 1 to 100 employees. See Pub. L. No. 111-148, §1304(b), 124 
Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[C] The large group market includes plans sold by insurers to large 
employers. Prior to PPACA, a large employer was defined in federal law 
as having a minimum of 51 employers. Under PPACA, a large employer is 
defined as having 101 or more employees. In 2012, states had the 
option of continuing to define a large employer as having 51 or more 
employees. Starting in 2016, states must define a large employer as 
those having 101 or more employees. See Pub. L. No. 111-148, §1304(b), 
124 Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[End of table] 

[End of section] 

Appendix II: Insurers' Spending of Net Premiums by State for 2011 and 
2012: 

This appendix presents information on insurers' spending as a percent 
of their net premiums, by state for all markets combined for 2011 (see 
table 8) and for 2012 (see table 9). 

Table 8: Insurers' Spending as Percent of Net Premiums[A] in 2011 by 
State, for all Markets Combined: 

State: Alabama; 
Medical claims: 90.0%; 
Non-claims costs[B]: 5.4%; 
Premium surplus[C]: 4.3%; 
Quality improvement activities: 0.3%; 
Total: 100%. 

State: Alaska; 
Medical claims: 86.0%; 
Non-claims costs[B]: 8.5%; 
Premium surplus[C]: 4.6%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Arizona; 
Medical claims: 83.4%; 
Non-claims costs[B]: 12.9%; 
Premium surplus[C]: 2.8%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Arkansas; 
Medical claims: 83.6%; 
Non-claims costs[B]: 13.1%; 
Premium surplus[C]: 2.5%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: California; 
Medical claims: 89.1%; 
Non-claims costs[B]: 7.9%; 
Premium surplus[C]: 2.6%; 
Quality improvement activities: 0.5%; 
Total: 100%. 

State: Colorado; 
Medical claims: 86.4%; 
Non-claims costs[B]: 10.4%; 
Premium surplus[C]: 2.5%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Connecticut; 
Medical claims: 84.0%; 
Non-claims costs[B]: 9.0%; 
Premium surplus[C]: 6.1%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Delaware; 
Medical claims: 84.2%; 
Non-claims costs[B]: 10.0%; 
Premium surplus[C]: 5.3%; 
Quality improvement activities: 0.5%; 
Total: 100%. 

State: District of Columbia; 
Medical claims: 83.7%; 
Non-claims costs[B]: 8.9%; 
Premium surplus[C]: 6.7%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Florida; 
Medical claims: 83.1%; 
Non-claims costs[B]: 11.5%; 
Premium surplus[C]: 4.6%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Georgia; 
Medical claims: 84.8%; 
Non-claims costs[B]: 11.3%; 
Premium surplus[C]: 2.9%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Hawaii; 
Medical claims: 89.7%; 
Non-claims costs[B]: 7.0%; 
Premium surplus[C]: 2.6%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Idaho; 
Medical claims: 86.9%; 
Non-claims costs[B]: 12.1%; 
Premium surplus[C]: 0.3%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Illinois; 
Medical claims: 86.7%; 
Non-claims costs[B]: 9.3%; 
Premium surplus[C]: 3.4%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Indiana; 
Medical claims: 84.9%; 
Non-claims costs[B]: 9.3%; 
Premium surplus[C]: 4.9%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Iowa; 
Medical claims: 85.8%; 
Non-claims costs[B]: 10.8%; 
Premium surplus[C]: 2.5%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Kansas; 
Medical claims: 87.1%; 
Non-claims costs[B]: 11.2%; 
Premium surplus[C]: 1.2%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Kentucky; 
Medical claims: 83.6%; 
Non-claims costs[B]: 10.4%; 
Premium surplus[C]: 4.9%; 
Quality improvement activities: 1.1%; 
Total: 100%. 

State: Louisiana; 
Medical claims: 84.0%; 
Non-claims costs[B]: 10.8%; 
Premium surplus[C]: 4.8%; 
Quality improvement activities: 0.4%; 
Total: 100%. 

State: Maine; 
Medical claims: 88.1%; 
Non-claims costs[B]: 7.4%; 
Premium surplus[C]: 3.6%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Maryland; 
Medical claims: 86.2%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: 2.0%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Massachusetts; 
Medical claims: 87.6%; 
Non-claims costs[B]: 9.7%; 
Premium surplus[C]: 1.9%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Michigan; 
Medical claims: 87.2%; 
Non-claims costs[B]: 10.4%; 
Premium surplus[C]: 1.7%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Minnesota; 
Medical claims: 86.9%; 
Non-claims costs[B]: 9.1%; 
Premium surplus[C]: 3.4%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Mississippi; 
Medical claims: 86.9%; 
Non-claims costs[B]: 11.7%; 
Premium surplus[C]: 0.9%; 
Quality improvement activities: 0.4%; 
Total: 100%. 

State: Missouri; 
Medical claims: 83.2%; 
Non-claims costs[B]: 11.2%; 
Premium surplus[C]: 4.6%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Montana; 
Medical claims: 87.3%; 
Non-claims costs[B]: 11.9%; 
Premium surplus[C]: 0.3%; 
Quality improvement activities: 0.5%; 
Total: 100%. 

State: Nebraska; 
Medical claims: 87.3%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: 1.6%; 
Quality improvement activities: 0.4%; 
Total: 100%. 

State: Nevada; 
Medical claims: 83.4%; 
Non-claims costs[B]: 12.3%; 
Premium surplus[C]: 3.0%; 
Quality improvement activities: 1.3%; 
Total: 100%. 

State: New Hampshire; 
Medical claims: 87.1%; 
Non-claims costs[B]: 9.3%; 
Premium surplus[C]: 2.7%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: New Jersey; 
Medical claims: 86.0%; 
Non-claims costs[B]: 11.8%; 
Premium surplus[C]: 1.4%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: New Mexico; 
Medical claims: 88.7%; 
Non-claims costs[B]: 10.9%; 
Premium surplus[C]: -0.8%; 
Quality improvement activities: 1.2%; 
Total: 100%. 

State: New York; 
Medical claims: 89.3%; 
Non-claims costs[B]: 7.0%; 
Premium surplus[C]: 3.0%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: North Carolina; 
Medical claims: 84.5%; 
Non-claims costs[B]: 12.6%; 
Premium surplus[C]: 2.2%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: North Dakota; 
Medical claims: 90.1%; 
Non-claims costs[B]: 6.0%; 
Premium surplus[C]: 3.4%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Ohio; 
Medical claims: 85.3%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: 3.0%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Oklahoma; 
Medical claims: 84.4%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: 4.4%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Oregon; 
Medical claims: 88.2%; 
Non-claims costs[B]: 9.4%; 
Premium surplus[C]: 1.9%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Pennsylvania; 
Medical claims: 86.3%; 
Non-claims costs[B]: 9.8%; 
Premium surplus[C]: 3.1%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Rhode Island; 
Medical claims: 85.4%; 
Non-claims costs[B]: 11.6%; 
Premium surplus[C]: 2.2%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: South Carolina; 
Medical claims: 83.0%; 
Non-claims costs[B]: 12.0%; 
Premium surplus[C]: 4.3%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: South Dakota; 
Medical claims: 89.0%; 
Non-claims costs[B]: 8.9%; 
Premium surplus[C]: 1.1%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Tennessee; 
Medical claims: 81.7%; 
Non-claims costs[B]: 12.2%; 
Premium surplus[C]: 4.5%; 
Quality improvement activities: 1.5%; 
Total: 100%. 

State: Texas; 
Medical claims: 83.5%; 
Non-claims costs[B]: 11.6%; 
Premium surplus[C]: 4.1%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Utah; 
Medical claims: 86.1%; 
Non-claims costs[B]: 10.9%; 
Premium surplus[C]: 2.3%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Vermont; 
Medical claims: 88.0%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: 0.4%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Virginia; 
Medical claims: 85.5%; 
Non-claims costs[B]: 8.6%; 
Premium surplus[C]: 5.0%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Washington; 
Medical claims: 86.9%; 
Non-claims costs[B]: 9.8%; 
Premium surplus[C]: 2.2%; 
Quality improvement activities: 1.1%; 
Total: 100%. 

State: West Virginia; 
Medical claims: 86.8%; 
Non-claims costs[B]: 8.7%; 
Premium surplus[C]: 3.6%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Wisconsin; 
Medical claims: 90.4%; 
Non-claims costs[B]: 9.0%; 
Premium surplus[C]: -0.2%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Wyoming; 
Medical claims: 87.2%; 
Non-claims costs[B]: 9.9%; 
Premium surplus[C]: 2.7%; 
Quality improvement activities: 0.2%; 
Total: 100%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Notes: The markets include large group, small group, and individual. 
Under PPACA, a small employer is defined as having from 1 to 100 
employees and a large employer is defined as having 101 or more 
employees. However, in 2011 states had the option of continuing to 
define small and large employers with definitions established in 
federal law prior to PPACA (small group as having a maximum of 50 and 
large group as having 51 or more employees). Starting in 2016, states 
must define small and large employers under the PPACA definition. See 
Pub. L. No. 111-148, §1304(b), 124 Stat. 172 (codified at 42 U.S.C. § 
18024(b)); 45 C.F.R. § 158.103 (2013). The individual market includes 
plans sold by insurers directly to individuals. Insurers operating in 
the insular areas of American Samoa, Guam, Northern Mariana Islands, 
Puerto Rico, and United States Virgin Islands were also subject to the 
PPACA medical loss ratio (MLR) requirements. Rows may not sum to 100 
due to rounding. 

[A] Net premiums is the amount of insurers' earned premiums after 
subtracting the insurer's federal and state taxes and licensing or 
regulatory fees. Net premiums is the denominator in the PPACA MLR 
formula. 

[B] Non-claims costs include cost containment expenses, all other 
claims adjustment expenses, direct sales' salaries and benefits, 
agents' and brokers' fees and commissions, other taxes and other 
general and administrative expenses. 

[C] The insurer's premium surplus is the amount remaining after 
subtracting from net premiums the costs associated with medical claims 
and quality improvement activities as well as non-claims costs. An 
insurer's premium surplus includes profit and other reserved capital 
but does not account for any PPACA MLR rebates the insurer may have to 
pay. 

[End of table] 

Table 9: Insurers' Spending as Percent of Net Premiums[A] in 2012 by 
State, for all Markets Combined: 

State: Alabama; 
Medical claims: 92.2%; 
Non-claims costs[B]: 10.0%; 
Premium surplus[C]: -2.6%; 
Quality improvement activities: 0.4%; 
Total: 100%. 

State: Alaska; 
Medical claims: 87.0%; 
Non-claims costs[B]: 8.0%; 
Premium surplus[C]: 4.2%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Arizona; 
Medical claims: 84.3%; 
Non-claims costs[B]: 12.3%; 
Premium surplus[C]: 2.2%; 
Quality improvement activities: 1.2%; 
Total: 100%. 

State: Arkansas; 
Medical claims: 84.7%; 
Non-claims costs[B]: 13.1%; 
Premium surplus[C]: 1.2%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: California; 
Medical claims: 88.7%; 
Non-claims costs[B]: 7.8%; 
Premium surplus[C]: 2.9%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Colorado; 
Medical claims: 87.6%; 
Non-claims costs[B]: 10.0%; 
Premium surplus[C]: 1.7%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Connecticut; 
Medical claims: 86.1%; 
Non-claims costs[B]: 9.5%; 
Premium surplus[C]: 3.5%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Delaware; 
Medical claims: 84.8%; 
Non-claims costs[B]: 10.2%; 
Premium surplus[C]: 4.4%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: District of Columbia; 
Medical claims: 87.0%; 
Non-claims costs[B]: 8.3%; 
Premium surplus[C]: 3.8%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Florida; 
Medical claims: 85.4%; 
Non-claims costs[B]: 11.5%; 
Premium surplus[C]: 2.2%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Georgia; 
Medical claims: 87.3%; 
Non-claims costs[B]: 10.9%; 
Premium surplus[C]: 0.8%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Hawaii; 
Medical claims: 90.5%; 
Non-claims costs[B]: 7.4%; 
Premium surplus[C]: 1.4%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Idaho; 
Medical claims: 88.8%; 
Non-claims costs[B]: 13.6%; 
Premium surplus[C]: -3.0%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Illinois; 
Medical claims: 86.6%; 
Non-claims costs[B]: 9.1%; 
Premium surplus[C]: 3.6%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Indiana; 
Medical claims: 84.2%; 
Non-claims costs[B]: 9.6%; 
Premium surplus[C]: 5.3%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Iowa; 
Medical claims: 86.2%; 
Non-claims costs[B]: 10.9%; 
Premium surplus[C]: 2.1%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Kansas; 
Medical claims: 87.4%; 
Non-claims costs[B]: 11.6%; 
Premium surplus[C]: 0.5%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Kentucky; 
Medical claims: 83.9%; 
Non-claims costs[B]: 10.4%; 
Premium surplus[C]: 4.6%; 
Quality improvement activities: 1.2%; 
Total: 100%. 

State: Louisiana; 
Medical claims: 84.8%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: 4.0%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Maine; 
Medical claims: 88.7%; 
Non-claims costs[B]: 7.9%; 
Premium surplus[C]: 2.5%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Maryland; 
Medical claims: 87.1%; 
Non-claims costs[B]: 10.2%; 
Premium surplus[C]: 1.4%; 
Quality improvement activities: 1.3%; 
Total: 100%. 

State: Massachusetts; 
Medical claims: 88.3%; 
Non-claims costs[B]: 8.8%; 
Premium surplus[C]: 1.9%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Michigan; 
Medical claims: 86.2%; 
Non-claims costs[B]: 11.0%; 
Premium surplus[C]: 1.9%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Minnesota; 
Medical claims: 89.7%; 
Non-claims costs[B]: 9.2%; 
Premium surplus[C]: 0.4%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Mississippi; 
Medical claims: 90.1%; 
Non-claims costs[B]: 11.8%; 
Premium surplus[C]: -2.4%; 
Quality improvement activities: 0.5%; 
Total: 100%. 

State: Missouri; 
Medical claims: 85.4%; 
Non-claims costs[B]: 10.4%; 
Premium surplus[C]: 3.3%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Montana; 
Medical claims: 89.3%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: -0.6%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Nebraska; 
Medical claims: 87.6%; 
Non-claims costs[B]: 10.8%; 
Premium surplus[C]: 1.2%; 
Quality improvement activities: 0.4%; 
Total: 100%. 

State: Nevada; 
Medical claims: 83.3%; 
Non-claims costs[B]: 10.9%; 
Premium surplus[C]: 4.4%; 
Quality improvement activities: 1.5%; 
Total: 100%. 

State: New Hampshire; 
Medical claims: 86.2%; 
Non-claims costs[B]: 9.2%; 
Premium surplus[C]: 3.7%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: New Jersey; 
Medical claims: 85.4%; 
Non-claims costs[B]: 11.2%; 
Premium surplus[C]: 2.5%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: New Mexico; 
Medical claims: 91.9%; 
Non-claims costs[B]: 10.9%; 
Premium surplus[C]: -4.4%; 
Quality improvement activities: 1.6%; 
Total: 100%. 

State: New York; 
Medical claims: 88.7%; 
Non-claims costs[B]: 6.2%; 
Premium surplus[C]: 4.3%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: North Carolina; 
Medical claims: 81.2%; 
Non-claims costs[B]: 11.7%; 
Premium surplus[C]: 6.2%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: North Dakota; 
Medical claims: 91.5%; 
Non-claims costs[B]: 6.7%; 
Premium surplus[C]: 1.2%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Ohio; 
Medical claims: 86.8%; 
Non-claims costs[B]: 9.9%; 
Premium surplus[C]: 2.4%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Oklahoma; 
Medical claims: 85.5%; 
Non-claims costs[B]: 9.7%; 
Premium surplus[C]: 4.1%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Oregon; 
Medical claims: 88.3%; 
Non-claims costs[B]: 9.5%; 
Premium surplus[C]: 1.5%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: Pennsylvania; 
Medical claims: 88.4%; 
Non-claims costs[B]: 9.9%; 
Premium surplus[C]: 0.9%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Rhode Island; 
Medical claims: 87.1%; 
Non-claims costs[B]: 11.3%; 
Premium surplus[C]: 0.9%; 
Quality improvement activities: 0.7%; 
Total: 100%. 

State: South Carolina; 
Medical claims: 85.5%; 
Non-claims costs[B]: 11.9%; 
Premium surplus[C]: 1.7%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: South Dakota; 
Medical claims: 89.7%; 
Non-claims costs[B]: 8.6%; 
Premium surplus[C]: 0.7%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Tennessee; 
Medical claims: 83.1%; 
Non-claims costs[B]: 12.1%; 
Premium surplus[C]: 3.2%; 
Quality improvement activities: 1.6%; 
Total: 100%. 

State: Texas; 
Medical claims: 85.2%; 
Non-claims costs[B]: 11.0%; 
Premium surplus[C]: 2.9%; 
Quality improvement activities: 1.0%; 
Total: 100%. 

State: Utah; 
Medical claims: 87.5%; 
Non-claims costs[B]: 10.7%; 
Premium surplus[C]: 1.0%; 
Quality improvement activities: 0.8%; 
Total: 100%. 

State: Vermont; 
Medical claims: 90.3%; 
Non-claims costs[B]: 9.4%; 
Premium surplus[C]: -0.6%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Virginia; 
Medical claims: 86.9%; 
Non-claims costs[B]: 8.5%; 
Premium surplus[C]: 3.7%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Washington; 
Medical claims: 88.2%; 
Non-claims costs[B]: 9.9%; 
Premium surplus[C]: 0.8%; 
Quality improvement activities: 1.1%; 
Total: 100%. 

State: West Virginia; 
Medical claims: 87.9%; 
Non-claims costs[B]: 8.1%; 
Premium surplus[C]: 3.4%; 
Quality improvement activities: 0.6%; 
Total: 100%. 

State: Wisconsin; 
Medical claims: 89.5%; 
Non-claims costs[B]: 8.8%; 
Premium surplus[C]: 0.9%; 
Quality improvement activities: 0.9%; 
Total: 100%. 

State: Wyoming; 
Medical claims: 82.8%; 
Non-claims costs[B]: 10.1%; 
Premium surplus[C]: 6.7%; 
Quality improvement activities: 0.3%; 
Total: 100%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Notes: The markets include large group, small group, and individual. 
Under PPACA, a small employer is defined as having from 1 to 100 
employees and a large employer is defined as having 101 or more 
employees. However, in 2011 states had the option of continuing to 
define small and large employers with definitions established in 
federal law prior to PPACA (small group as having a maximum of 50 and 
large group as having 51 or more employees). Starting in 2016, states 
must define small and large employers under the PPACA definition. See 
Pub. L. No. 111-148, §1304(b), 124 Stat. 172 (codified at 42 U.S.C. § 
18024(b)); 45 C.F.R. § 158.103 (2013). The individual market includes 
plans sold by insurers directly to individuals. Insurers operating in 
the insular areas of American Samoa, Guam, Northern Mariana Islands, 
Puerto Rico, and United States Virgin Islands were also subject to the 
PPACA medical loss ratio (MLR) requirements. Rows may not sum to 100 
due to rounding. 

[A] Net premiums is the amount of insurers' earned premiums after 
subtracting the insurer's federal and state taxes and licensing or 
regulatory fees. Net premiums is the denominator in the PPACA MLR 
formula. 

[B] Non-claims costs include cost containment expenses, all other 
claims adjustment expenses, direct sales' salaries and benefits, 
agents' and brokers' fees and commissions, other taxes and other 
general and administrative expenses. 

[C] The insurer's premium surplus is the amount remaining after 
subtracting from net premiums the costs associated with medical claims 
and quality improvement activities as well as non-claims costs. An 
insurer's premium surplus includes profit and other reserved capital 
but does not account for any PPACA MLR rebates the insurer may have to 
pay. 

[End of table] 

[End of section] 

Appendix III: PPACA Medical Loss Ratio Rebates by State for 2011 and 
2012: 

This appendix presents information on the total amount of PPACA 
medical loss ratio rebates that insurers paid to enrollees and 
policyholders who paid premiums, by state and insurance market for 
2011 (see table 10) and for 2012 (see table 11). 

Table 10: Total Amount of PPACA Medical Loss Ratio Rebates Insurers 
Paid to Enrollees and Policyholders in 2011, by State and Insurance 
Market: 

State: Alabama; 
Total: $4,220,331; 
Rebate amounts (in dollars): 
Individual market[A]; $3,189,860; 
Small group market[B]; $1,030,471; 
Large group market[C]; $0. 

State: Alaska; 
Total: $1,280,908; 
Rebate amounts (in dollars): 
Individual market[A]; $0; 
Small group market[B]; $1,280,908; 
Large group market[C]; $0. 

State: Arizona; 
Total: $29,617,637; 
Rebate amounts (in dollars): 
Individual market[A]; $12,931,977; 
Small group market[B]; $8,852,429; 
Large group market[C]; $7,833,231. 

State: Arkansas; 
Total: $7,976,578; 
Rebate amounts (in dollars): 
Individual market[A]; $533,645; 
Small group market[B]; $5,856,324; 
Large group market[C]; $1,586,610. 

State: California; 
Total: $77,405,460; 
Rebate amounts (in dollars): 
Individual market[A]; $20,644,294; 
Small group market[B]; $42,633,080; 
Large group market[C]; $14,128,086. 

State: Colorado; 
Total: $26,171,887; 
Rebate amounts (in dollars): 
Individual market[A]; $3,063,156; 
Small group market[B]; $653,254; 
Large group market[C]; $22,455,477. 

State: Connecticut; 
Total: $13,176,140; 
Rebate amounts (in dollars): 
Individual market[A]; $4,216,883; 
Small group market[B]; $459,952; 
Large group market[C]; $8,499,305. 

State: Delaware; 
Total: $2,563,523; 
Rebate amounts (in dollars): 
Individual market[A]; $1,062,076; 
Small group market[B]; $0; 
Large group market[C]; $1,501,447. 

State: District of Columbia; 
Total: $55,183,584; 
Rebate amounts (in dollars): 
Individual market[A]; $199,633; 
Small group market[B]; $9,337,321; 
Large group market[C]; $45,646,630. 

State: Florida; 
Total: $123,625,660; 
Rebate amounts (in dollars): 
Individual market[A]; $47,257,109; 
Small group market[B]; $50,713,189; 
Large group market[C]; $25,655,361. 

State: Georgia; 
Total: $19,764,771; 
Rebate amounts (in dollars): 
Individual market[A]; $2,889,653; 
Small group market[B]; $1,754,466; 
Large group market[C]; $15,120,652. 

State: Hawaii; 
Total: $195,053; 
Rebate amounts (in dollars): 
Individual market[A]; $0; 
Small group market[B]; $0; 
Large group market[C]; $195,053. 

State: Idaho; 
Total: $1,124,918; 
Rebate amounts (in dollars): 
Individual market[A]; $144,303; 
Small group market[B]; $980,615; 
Large group market[C]; $0. 

State: Illinois; 
Total: $26,611,126; 
Rebate amounts (in dollars): 
Individual market[A]; $7,794,746; 
Small group market[B]; $12,200,294; 
Large group market[C]; $6,616,086. 

State: Indiana; 
Total: $14,305,969; 
Rebate amounts (in dollars): 
Individual market[A]; $2,894,670; 
Small group market[B]; $9,243,360; 
Large group market[C]; $2,167,939. 

State: Iowa; 
Total: $1,469,276; 
Rebate amounts (in dollars): 
Individual market[A]; $0; 
Small group market[B]; $1,469,276; 
Large group market[C]; $0. 

State: Kansas; 
Total: $4,177,418; 
Rebate amounts (in dollars): 
Individual market[A]; $3,573,859; 
Small group market[B]; $603,559; 
Large group market[C]; $0. 

State: Kentucky; 
Total: $15,326,103; 
Rebate amounts (in dollars): 
Individual market[A]; $232,937; 
Small group market[B]; $4,119,316; 
Large group market[C]; $10,973,850. 

State: Louisiana; 
Total: $4,272,659; 
Rebate amounts (in dollars): 
Individual market[A]; $3,018,598; 
Small group market[B]; $0; 
Large group market[C]; $1,254,060. 

State: Maine; 
Total: $2,579,922; 
Rebate amounts (in dollars): 
Individual market[A]; $0; 
Small group market[B]; $0; 
Large group market[C]; $2,579,922. 

State: Maryland; 
Total: $29,368,794; 
Rebate amounts (in dollars): 
Individual market[A]; $12,892,466; 
Small group market[B]; $2,281,663; 
Large group market[C]; $14,194,665. 

State: Massachusetts; 
Total: $13,492,100; 
Rebate amounts (in dollars): 
Individual market[A]; $750,600; 
Small group market[B]; $10,292,374; 
Large group market[C]; $2,449,125. 

State: Michigan; 
Total: $14,034,163; 
Rebate amounts (in dollars): 
Individual market[A]; $11,998,544; 
Small group market[B]; $2,035,619; 
Large group market[C]; $0. 

State: Minnesota; 
Total: $8,956,885; 
Rebate amounts (in dollars): 
Individual market[A]; $494,492; 
Small group market[B]; $0; 
Large group market[C]; $8,462,393. 

State: Mississippi; 
Total: $6,235,077; 
Rebate amounts (in dollars): 
Individual market[A]; $6,133,419; 
Small group market[B]; $101,658; 
Large group market[C]; $0. 

State: Missouri; 
Total: $61,468,647; 
Rebate amounts (in dollars): 
Individual market[A]; $16,348,539; 
Small group market[B]; $38,984,778; 
Large group market[C]; $6,135,330. 

State: Montana; 
Total: $2,567,493; 
Rebate amounts (in dollars): 
Individual market[A]; $1,685,051; 
Small group market[B]; $882,442; 
Large group market[C]; $0. 

State: Nebraska; 
Total: $4,832,049; 
Rebate amounts (in dollars): 
Individual market[A]; $3,704,559; 
Small group market[B]; $1,127,491; 
Large group market[C]; $0. 

State: Nevada; 
Total: $5,184,115; 
Rebate amounts (in dollars): 
Individual market[A]; $828,521; 
Small group market[B]; $3,973,839; 
Large group market[C]; $381,755. 

State: New Hampshire; 
Total: $77,507; 
Rebate amounts (in dollars): 
Individual market[A]; $0; 
Small group market[B]; $0; 
Large group market[C]; $77,507. 

State: New Jersey; 
Total: $8,847,312; 
Rebate amounts (in dollars): 
Individual market[A]; $1,291,536; 
Small group market[B]; $0; 
Large group market[C]; $7,555,776. 

State: New Mexico; 
Total: $3,874,411; 
Rebate amounts (in dollars): 
Individual market[A]; $0; 
Small group market[B]; $3,874,411; 
Large group market[C]; $0. 

State: New York; 
Total: $96,075,052; 
Rebate amounts (in dollars): 
Individual market[A]; $6,048,297; 
Small group market[B]; $3,663,077; 
Large group market[C]; $86,363,678. 

State: North Carolina; 
Total: $19,461,110; 
Rebate amounts (in dollars): 
Individual market[A]; $3,192,881; 
Small group market[B]; $894,587; 
Large group market[C]; $15,373,642. 

State: North Dakota; 
Total: $10,160; 
Rebate amounts (in dollars): 
Individual market[A]; $10,160; 
Small group market[B]; $0; 
Large group market[C]; $0. 

State: Ohio; 
Total: $11,331,726; 
Rebate amounts (in dollars): 
Individual market[A]; $8,195,193; 
Small group market[B]; $3,136,533; 
Large group market[C]; $0. 

State: Oklahoma; 
Total: $20,641,441; 
Rebate amounts (in dollars): 
Individual market[A]; $6,947,424; 
Small group market[B]; $13,282,727; 
Large group market[C]; $411,290. 

State: Oregon; 
Total: $4,645,593; 
Rebate amounts (in dollars): 
Individual market[A]; $2,630,847; 
Small group market[B]; $1,209,614; 
Large group market[C]; $805,132. 

State: Pennsylvania; 
Total: $52,294,403; 
Rebate amounts (in dollars): 
Individual market[A]; $21,383,386; 
Small group market[B]; $345,698; 
Large group market[C]; $30,565,319. 

State: Rhode Island; 
Total: $0; 
Rebate amounts (in dollars): 
Individual market[A]; $0; 
Small group market[B]; $0; 
Large group market[C]; $0. 

State: South Carolina; 
Total: $19,630,152; 
Rebate amounts (in dollars): 
Individual market[A]; $15,277,769; 
Small group market[B]; $4,297,790; 
Large group market[C]; $54,594. 

State: South Dakota; 
Total: $47,948; 
Rebate amounts (in dollars): 
Individual market[A]; $47,948; 
Small group market[B]; $0; 
Large group market[C]; $0. 

State: Tennessee; 
Total: $30,631,189; 
Rebate amounts (in dollars): 
Individual market[A]; $18,569,459; 
Small group market[B]; $3,251,333; 
Large group market[C]; $8,810,396. 

State: Texas; 
Total: $168,534,316; 
Rebate amounts (in dollars): 
Individual market[A]; $136,040,527; 
Small group market[B]; $14,307,687; 
Large group market[C]; $18,186,102. 

State: Utah; 
Total: $4,963,580; 
Rebate amounts (in dollars): 
Individual market[A]; $2,741,795; 
Small group market[B]; $1,364,193; 
Large group market[C]; $857,591. 

State: Vermont; 
Total: $2,679,964; 
Rebate amounts (in dollars): 
Individual market[A]; $333,946; 
Small group market[B]; $0; 
Large group market[C]; $2,346,018. 

State: Virginia; 
Total: $44,066,000; 
Rebate amounts (in dollars): 
Individual market[A]; $5,010,247; 
Small group market[B]; $23,183,222; 
Large group market[C]; $15,872,530. 

State: Washington; 
Total: $594,031; 
Rebate amounts (in dollars): 
Individual market[A]; $432,333; 
Small group market[B]; $0; 
Large group market[C]; $161,698. 

State: West Virginia; 
Total: $2,703,790; 
Rebate amounts (in dollars): 
Individual market[A]; $2,268,826; 
Small group market[B]; $434,964; 
Large group market[C]; $0. 

State: Wisconsin; 
Total: $10,167,510; 
Rebate amounts (in dollars): 
Individual market[A]; $649,028; 
Small group market[B]; $4,854,402; 
Large group market[C]; $4,664,080. 

State: Wyoming; 
Total: $1,112,043; 
Rebate amounts (in dollars): 
Individual market[A]; $932,840; 
Small group market[B]; $179,203; 
Large group market[C]; $0. 

Source: GAO analysis of CMS data. GAO-14-580. 

Note: Insurers operating in the insular areas of American Samoa, Guam, 
Northern Mariana Islands, Puerto Rico, and United States Virgin 
Islands were also subject to the PPACA medical loss ratio requirements. 

[A] The individual market includes plans sold by insurers directly to 
individuals. 

[B] The small group market includes plans sold by insurers to small 
employers. Prior to PPACA, a small employer was defined in federal law 
as having a maximum of 50 employees. Under PPACA, a small employer is 
defined as having from 1 to 100 employees. In 2011, states had the 
option of continuing to define a small employer as having 50 or fewer 
employees. Starting in 2016, states must define a small employer as 
having from 1 to 100 employees. See Pub. L. No. 111-148, §1304(b), 124 
Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[C] The large group market includes plans sold by insurers to large 
employers. Prior to PPACA, a large employer was defined in federal law 
as having a minimum of 51 employers. Under PPACA, a large employer is 
defined as having 101 or more employees. In 2011, states had the 
option of continuing to define a large employer as having 51 or more 
employees. Starting in 2016, states must define a large employer as 
those having 101 or more employees. See Pub. L. No. 111-148, §1304(b), 
124 Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[End of table] 

Table 11: Total Amount of PPACA Medical Loss Ratio Rebates Insurers 
Paid to Enrollees and Policyholders in 2012, by State and Insurance 
Market: 

State: Alabama; 
Total: $314,374; 
Rebate amounts (in dollars): 
Individual market[A]: $314,374; 
Small group market[B]: $0; 
Large group market[C]: $0. 

State: Alaska; 
Total: $1,645,701; 
Rebate amounts (in dollars): 
Individual market[A]: $937,064; 
Small group market[B]: $708,637; 
Large group market[C]: $0. 

State: Arizona; 
Total: $18,711,068; 
Rebate amounts (in dollars): 
Individual market[A]: $2,531,582; 
Small group market[B]: $5,644,562; 
Large group market[C]: $10,534,924. 

State: Arkansas; 
Total: $4,171,735; 
Rebate amounts (in dollars): 
Individual market[A]: $864,644; 
Small group market[B]: $2,115,463; 
Large group market[C]: $1,191,628. 

State: California; 
Total: $65,666,231; 
Rebate amounts (in dollars): 
Individual market[A]: $18,739,344; 
Small group market[B]: $41,973,768; 
Large group market[C]: $4,953,120. 

State: Colorado; 
Total: $11,486,675; 
Rebate amounts (in dollars): 
Individual market[A]: $1,296,964; 
Small group market[B]: $403,311; 
Large group market[C]: $9,786,401. 

State: Connecticut; 
Total: $5,530,448; 
Rebate amounts (in dollars): 
Individual market[A]: $1,408,528; 
Small group market[B]: $4,121,920; 
Large group market[C]: $0. 

State: Delaware; 
Total: $1,361,054; 
Rebate amounts (in dollars): 
Individual market[A]: $633,103; 
Small group market[B]: $0; 
Large group market[C]: $727,951. 

State: District of Columbia; 
Total: $5,149,792; 
Rebate amounts (in dollars): 
Individual market[A]: $85,582; 
Small group market[B]: $2,003,528; 
Large group market[C]: $3,060,682. 

State: Florida; 
Total: $54,560,916; 
Rebate amounts (in dollars): 
Individual market[A]: $39,766,048; 
Small group market[B]: $13,345,485; 
Large group market[C]: $1,449,383. 

State: Georgia; 
Total: $17,817,736; 
Rebate amounts (in dollars): 
Individual market[A]: $7,208,571; 
Small group market[B]: $10,329,073; 
Large group market[C]: $280,093. 

State: Hawaii; 
Total: $1,551,371; 
Rebate amounts (in dollars): 
Individual market[A]: $0; 
Small group market[B]: $0; 
Large group market[C]: $1,551,371. 

State: Idaho; 
Total: $2,300,265; 
Rebate amounts (in dollars): 
Individual market[A]: $214,330; 
Small group market[B]: $2,085,935; 
Large group market[C]: $0. 

State: Illinois; 
Total: $6,240,594; 
Rebate amounts (in dollars): 
Individual market[A]: $2,998,021; 
Small group market[B]: $1,506,688; 
Large group market[C]: $1,735,886. 

State: Indiana; 
Total: $22,656,341; 
Rebate amounts (in dollars): 
Individual market[A]: $890,422; 
Small group market[B]: $20,564,825; 
Large group market[C]: $1,201,094. 

State: Iowa; 
Total: $264,438; 
Rebate amounts (in dollars): 
Individual market[A]: $125,524; 
Small group market[B]: $0; 
Large group market[C]: $138,914. 

State: Kansas; 
Total: $4,043,320; 
Rebate amounts (in dollars): 
Individual market[A]: $2,748,348; 
Small group market[B]: $1,294,972; 
Large group market[C]: $0. 

State: Kentucky; 
Total: $14,405,533; 
Rebate amounts (in dollars): 
Individual market[A]: $10,966,162; 
Small group market[B]: $2,444,800; 
Large group market[C]: $994,572. 

State: Louisiana; 
Total: $2,473,246; 
Rebate amounts (in dollars): 
Individual market[A]: $1,215,914; 
Small group market[B]: $487,347; 
Large group market[C]: $769,985. 

State: Maine; 
Total: $501,240; 
Rebate amounts (in dollars): 
Individual market[A]: $0; 
Small group market[B]: $0; 
Large group market[C]: $501,240. 

State: Maryland; 
Total: $13,143,978; 
Rebate amounts (in dollars): 
Individual market[A]: $6,899,337; 
Small group market[B]: $0; 
Large group market[C]: $6,244,641. 

State: Massachusetts; 
Total: $40,126,759; 
Rebate amounts (in dollars): 
Individual market[A]: $3,140,949; 
Small group market[B]: $35,699,941; 
Large group market[C]: $1,285,870. 

State: Michigan; 
Total: $18,810,417; 
Rebate amounts (in dollars): 
Individual market[A]: $10,542,615; 
Small group market[B]: $7,059,979; 
Large group market[C]: $1,207,824. 

State: Minnesota; 
Total: $1,435,260; 
Rebate amounts (in dollars): 
Individual market[A]: $983,686; 
Small group market[B]: $0; 
Large group market[C]: $451,574. 

State: Mississippi; 
Total: $5,851,556; 
Rebate amounts (in dollars): 
Individual market[A]: $3,550,203; 
Small group market[B]: $881,517; 
Large group market[C]: $1,419,837. 

State: Missouri; 
Total: $19,186,416; 
Rebate amounts (in dollars): 
Individual market[A]: $3,059,896; 
Small group market[B]: $11,073,463; 
Large group market[C]: $5,053,056. 

State: Montana; 
Total: $1,537,571; 
Rebate amounts (in dollars): 
Individual market[A]: $1,395,689; 
Small group market[B]: $0; 
Large group market[C]: $141,882. 

State: Nebraska; 
Total: $2,000,151; 
Rebate amounts (in dollars): 
Individual market[A]: $1,345,830; 
Small group market[B]: $544,744; 
Large group market[C]: $109,577. 

State: Nevada; 
Total: $4,159,345; 
Rebate amounts (in dollars): 
Individual market[A]: $969,396; 
Small group market[B]: $2,516,061; 
Large group market[C]: $673,888. 

State: New Hampshire; 
Total: $1,171,335; 
Rebate amounts (in dollars): 
Individual market[A]: $497,882; 
Small group market[B]: $0; 
Large group market[C]: $673,453. 

State: New Jersey; 
Total: $10,768,382; 
Rebate amounts (in dollars): 
Individual market[A]: $0; 
Small group market[B]: $6,631,571; 
Large group market[C]: $4,136,811. 

State: New Mexico; 
Total: $239,567; 
Rebate amounts (in dollars): 
Individual market[A]: $80,853; 
Small group market[B]: $158,714; 
Large group market[C]: $0. 

State: New York; 
Total: $35,290,183; 
Rebate amounts (in dollars): 
Individual market[A]: $3,932,003; 
Small group market[B]: $3,454,360; 
Large group market[C]: $27,903,820. 

State: North Carolina; 
Total: $10,478,768; 
Rebate amounts (in dollars): 
Individual market[A]: $2,800,469; 
Small group market[B]: $2,665,508; 
Large group market[C]: $5,012,791. 

State: North Dakota; 
Total: $19,792; 
Rebate amounts (in dollars): 
Individual market[A]: $19,792; 
Small group market[B]: $0; 
Large group market[C]: $0. 

State: Ohio; 
Total: $486,681; 
Rebate amounts (in dollars): 
Individual market[A]: $360,491; 
Small group market[B]: $126,190; 
Large group market[C]: $0. 

State: Oklahoma; 
Total: $16,009,195; 
Rebate amounts (in dollars): 
Individual market[A]: $5,927,336; 
Small group market[B]: $6,075,797; 
Large group market[C]: $4,006,061. 

State: Oregon; 
Total: $3,327,997; 
Rebate amounts (in dollars): 
Individual market[A]: $863,555; 
Small group market[B]: $585,236; 
Large group market[C]: $1,879,206. 

State: Pennsylvania; 
Total: $6,877,987; 
Rebate amounts (in dollars): 
Individual market[A]: $6,056,538; 
Small group market[B]: $159,066; 
Large group market[C]: $662,383. 

State: Rhode Island; 
Total: $18,053; 
Rebate amounts (in dollars): 
Individual market[A]: $0; 
Small group market[B]: $0; 
Large group market[C]: $18,053. 

State: South Carolina; 
Total: $6,169,507; 
Rebate amounts (in dollars): 
Individual market[A]: $6,015,932; 
Small group market[B]: $153,575; 
Large group market[C]: $0. 

State: South Dakota; 
Total: $41,240; 
Rebate amounts (in dollars): 
Individual market[A]: $0; 
Small group market[B]: $0; 
Large group market[C]: $41,240. 

State: Tennessee; 
Total: $5,676,201; 
Rebate amounts (in dollars): 
Individual market[A]: $3,707,437; 
Small group market[B]: $1,263,676; 
Large group market[C]: $705,088. 

State: Texas; 
Total: $46,695,311; 
Rebate amounts (in dollars): 
Individual market[A]: $40,904,426; 
Small group market[B]: $2,034,381; 
Large group market[C]: $3,756,504. 

State: Utah; 
Total: $4,665,982; 
Rebate amounts (in dollars): 
Individual market[A]: $815,854; 
Small group market[B]: $3,262,953; 
Large group market[C]: $587,175. 

State: Vermont; 
Total: $126,810; 
Rebate amounts (in dollars): 
Individual market[A]: $0; 
Small group market[B]: $0; 
Large group market[C]: $126,810. 

State: Virginia; 
Total: $11,874,030; 
Rebate amounts (in dollars): 
Individual market[A]: $1,601,343; 
Small group market[B]: $7,065,955; 
Large group market[C]: $3,206,732. 

State: Washington; 
Total: $806,496; 
Rebate amounts (in dollars): 
Individual market[A]: $785,946; 
Small group market[B]: $0; 
Large group market[C]: $20,550. 

State: West Virginia; 
Total: $1,120,757; 
Rebate amounts (in dollars): 
Individual market[A]: $848,779; 
Small group market[B]: $271,978; 
Large group market[C]: $0. 

State: Wisconsin; 
Total: $3,567,932; 
Rebate amounts (in dollars): 
Individual market[A]: $765,370; 
Small group market[B]: $0; 
Large group market[C]: $2,802,562. 

State: Wyoming; 
Total: $1,477,087; 
Rebate amounts (in dollars): 
Individual market[A]: $201,532; 
Small group market[B]: $542,820; 
Large group market[C]: $732,735. 

Source: GAO analysis of CMS data. GAO-14-580. 

Note: Insurers operating in the insular areas of American Samoa, Guam, 
Northern Mariana Islands, Puerto Rico, and United States Virgin 
Islands were also subject to the PPACA medical loss ratio requirements. 

[A] The individual market includes plans sold by insurers directly to 
individuals. 

[B] The small group market includes plans sold by insurers to small 
employers. Prior to PPACA, a small employer was defined in federal law 
as having a maximum of 50 employees. Under PPACA, a small employer is 
defined as having from 1 to 100 employees. In 2012, states had the 
option of continuing to define a small employer as having 50 or fewer 
employees. Starting in 2016, states must define a small employer as 
having from 1 to 100 employees. See Pub. L. No. 111-148, §1304(b), 124 
Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[C] The large group market includes plans sold by insurers to large 
employers. Prior to PPACA, a large employer was defined in federal law 
as having a minimum of 51 employers. Under PPACA, a large employer is 
defined as having 101 or more employees. In 2012, states had the 
option of continuing to define a large employer as having 51 or more 
employees. Starting in 2016, states must define a large employer as 
those having 101 or more employees. See Pub. L. No. 111-148, §1304(b), 
124 Stat. 172 (codified at 42 U.S.C. § 18024(b)); 45 C.F.R. § 158.103 
(2013). 

[End of table] 

[End of section] 

Appendix IV: Rebates Insurers Would Have Paid with Agent and Broker 
Payments Excluded from 2011 and 2012 Calculations: 

This appendix presents information on the amount of rebates that 
insurers would have paid to enrollees and policyholders who paid 
premiums with agents' and brokers' commissions and fees excluded from 
the PPACA medical loss ratio and rebate calculations (absent other 
changes in business practices), compared to the actual amounts that 
insurers paid, by state for 2011 (see table 12) and for 2012 (see 
table 13). 

Table 12: Amount of Rebates Insurers Would Have Paid to Enrollees and 
Policyholders with Agents' and Brokers' Commissions and Fees Excluded 
from PPACA Medical Loss Ratio and Rebate Calculations Compared to 
Actual Amount of Rebates Insurers Paid in 2011 by State, for all 
Markets Combined: 

State: Alabama; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,220,331; 
Without agents' and brokers' commissions and fees: $2,717,619; 
Difference (% change): -36%. 

State: Alaska; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,280,908; 
Without agents' and brokers' commissions and fees: $412,957; 
Difference (% change): -68%. 

State: Arizona; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $29,617,637; 
Without agents' and brokers' commissions and fees: $2,935,154; 
Difference (% change): -90%. 

State: Arkansas; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $7,976,578; 
Without agents' and brokers' commissions and fees: $382,738; 
Difference (% change): -95%. 

State: California; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $77,405,460; 
Without agents' and brokers' commissions and fees: $10,933,330; 
Difference (% change): -86%. 

State: Colorado; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $26,171,887; 
Without agents' and brokers' commissions and fees: $13,204,301; 
Difference (% change): -50%. 

State: Connecticut; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $13,176,140; 
Without agents' and brokers' commissions and fees: $657,733; 
Difference (% change): -95%. 

State: Delaware; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,563,523; 
Without agents' and brokers' commissions and fees: $2,024,723; 
Difference (% change): -21%. 

State: District of Columbia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $55,183,584; 
Without agents' and brokers' commissions and fees: $37,751,449; 
Difference (% change): -32%. 

State: Florida; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $123,625,660; 
Without agents' and brokers' commissions and fees: $18,863,983; 
Difference (% change): -85%. 

State: Georgia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $19,764,771; 
Without agents' and brokers' commissions and fees: $4,205,820; 
Difference (% change): -79%. 

State: Hawaii; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $195,053; 
Without agents' and brokers' commissions and fees: $59,391; 
Difference (% change): -70%. 

State: Idaho; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,124,918; 
Without agents' and brokers' commissions and fees: $106,461; 
Difference (% change): -91%. 

State: Illinois; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $26,611,126; 
Without agents' and brokers' commissions and fees: $4,396,035; 
Difference (% change): -83%. 

State: Indiana; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $14,305,969; 
Without agents' and brokers' commissions and fees: $1,445,408; 
Difference (% change): -90%. 

State: Iowa; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,469,276; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: Kansas; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,177,418; 
Without agents' and brokers' commissions and fees: $999,233; 
Difference (% change): -76%. 

State: Kentucky; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $15,326,103; 
Without agents' and brokers' commissions and fees: $211,106; 
Difference (% change): -99%. 

State: Louisiana; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,272,659; 
Without agents' and brokers' commissions and fees: $683,325; 
Difference (% change): -84%. 

State: Maine; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,579,922; 
Without agents' and brokers' commissions and fees: $1,311,783; 
Difference (% change): -49%. 

State: Maryland; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $29,368,794; 
Without agents' and brokers' commissions and fees: $16,018,019; 
Difference (% change): -45%. 

State: Massachusetts; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $13,492,100; 
Without agents' and brokers' commissions and fees: $6,082,374; 
Difference (% change): -55%. 

State: Michigan; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $14,034,163; 
Without agents' and brokers' commissions and fees: $2,992,204; 
Difference (% change): -79%. 

State: Minnesota; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $8,956,885; 
Without agents' and brokers' commissions and fees: $5,050,162; 
Difference (% change): -44%. 

State: Mississippi; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $6,235,077; 
Without agents' and brokers' commissions and fees: $4,050,093; 
Difference (% change): -35%. 

State: Missouri; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $61,468,647; 
Without agents' and brokers' commissions and fees: $7,872,733; 
Difference (% change): -87%. 

State: Montana; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,567,493; 
Without agents' and brokers' commissions and fees: $422,145; 
Difference (% change): -84%. 

State: Nebraska; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,832,049; 
Without agents' and brokers' commissions and fees: $861,853; 
Difference (% change): -82%. 

State: Nevada; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $5,184,115; 
Without agents' and brokers' commissions and fees: $68,494; 
Difference (% change): -99%. 

State: New Hampshire; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $77,507; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: New Jersey; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $8,847,312; 
Without agents' and brokers' commissions and fees: $3,737,623; 
Difference (% change): -58%. 

State: New Mexico; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $3,874,411; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: New York; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $96,075,052; 
Without agents' and brokers' commissions and fees: $9,376,682; 
Difference (% change): -90%. 

State: North Carolina; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $19,461,110; 
Without agents' and brokers' commissions and fees: $2,840,313; 
Difference (% change): -85%. 

State: North Dakota; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $10,160; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: Ohio; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $11,331,726; 
Without agents' and brokers' commissions and fees: $1,203,396; 
Difference (% change): -89%. 

State: Oklahoma; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $20,641,441; 
Without agents' and brokers' commissions and fees: $2,747,220; 
Difference (% change): -87%. 

State: Oregon; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,645,593; 
Without agents' and brokers' commissions and fees: $1,699,414; 
Difference (% change): -63%. 

State: Pennsylvania; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $52,294,403; 
Without agents' and brokers' commissions and fees: $31,057,232; 
Difference (% change): -41%. 

State: Rhode Island; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $0; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): 0%. 

State: South Carolina; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $19,630,152; 
Without agents' and brokers' commissions and fees: $1,707,491; 
Difference (% change): -91%. 

State: South Dakota; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $47,948; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: Tennessee; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $30,631,189; 
Without agents' and brokers' commissions and fees: $9,309,181; 
Difference (% change): -70%. 

State: Texas; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $168,534,316; 
Without agents' and brokers' commissions and fees: $42,209,454; 
Difference (% change): -75%. 

State: Utah; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,963,580; 
Without agents' and brokers' commissions and fees: $486,863; 
Difference (% change): -90%. 

State: Vermont; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,679,964; 
Without agents' and brokers' commissions and fees: $1,883,498; 
Difference (% change): -30%. 

State: Virginia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $44,066,000; 
Without agents' and brokers' commissions and fees: $4,722,362; 
Difference (% change): -89%. 

State: Washington; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $594,031; 
Without agents' and brokers' commissions and fees: $58,584; 
Difference (% change): -90%. 

State: West Virginia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,703,790; 
Without agents' and brokers' commissions and fees: $1,306,546; 
Difference (% change): -52%. 

State: Wisconsin; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $10,167,510; 
Without agents' and brokers' commissions and fees: $204,151; 
Difference (% change): -98%. 

State: Wyoming; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,112,043; 
Without agents' and brokers' commissions and fees: $542,092; 
Difference (% change): -51%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Notes: The markets include large group, small group, and individual. 
Under PPACA, a small employer is defined as having from 1 to 100 
employees and a large employer is defined as having 101 or more 
employees. However, in 2011 states had the option of continuing to 
define small and large employers with definitions established in 
federal law prior to PPACA (small group as having a maximum of 50 and 
large group as having 51 or more employees). Starting in 2016, states 
must define small and large employers under the PPACA definition. See 
Pub. L. No. 111-148, §1304(b), 124 Stat. 172 (codified at 42 U.S.C. § 
18024(b)); 45 C.F.R. § 158.103 (2013). The individual market includes 
plans sold by insurers directly to individuals. Insurers operating in 
the insular areas of American Samoa, Guam, Northern Mariana Islands, 
Puerto Rico, and United States Virgin Islands were also subject to the 
PPACA medical loss ratio requirements. 

[End of table] 

Table 13: Amount of Rebates Insurers Would Have Paid to Enrollees and 
Policyholders with Agents' and Brokers' Commissions and Fees Excluded 
from PPACA Medical Loss Ratio and Rebate Calculations Compared to 
Actual Amount of Rebates Insurers Paid in 2012 by State, for all 
Markets Combined: 

State: Alabama; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $314,374; 
Without agents' and brokers' commissions and fees: $240,188; 
Difference (% change): -24%. 

State: Alaska; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,645,701; 
Without agents' and brokers' commissions and fees: $427,816; 
Difference (% change): -74%. 

State: Arizona; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $18,711,068; 
Without agents' and brokers' commissions and fees: $2,327,960; 
Difference (% change): -88%. 

State: Arkansas; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,171,735; 
Without agents' and brokers' commissions and fees: $1,160,162; 
Difference (% change): -72%. 

State: California; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $65,666,231; 
Without agents' and brokers' commissions and fees: $6,818,746; 
Difference (% change): -90%. 

State: Colorado; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $11,486,675; 
Without agents' and brokers' commissions and fees: $686,892; 
Difference (% change): -94%. 

State: Connecticut; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $5,530,448; 
Without agents' and brokers' commissions and fees: $1,103,280; 
Difference (% change): -80%. 

State: Delaware; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,361,054; 
Without agents' and brokers' commissions and fees: $1,203,270; 
Difference (% change): -12%. 

State: District of Columbia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $5,149,792; 
Without agents' and brokers' commissions and fees: $2,454,703; 
Difference (% change): -52%. 

State: Florida; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $54,560,916; 
Without agents' and brokers' commissions and fees: $15,232,312; 
Difference (% change): -72%. 

State: Georgia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $17,817,736; 
Without agents' and brokers' commissions and fees: $2,920,457; 
Difference (% change): -84%. 

State: Hawaii; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,551,371; 
Without agents' and brokers' commissions and fees: $1,394,767; 
Difference (% change): -10%. 

State: Idaho; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,300,265; 
Without agents' and brokers' commissions and fees: $301,454; 
Difference (% change): -87%. 

State: Illinois; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $6,240,594; 
Without agents' and brokers' commissions and fees: $2,187,437; 
Difference (% change): -65%. 

State: Indiana; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $22,656,341; 
Without agents' and brokers' commissions and fees: $1,763,988; 
Difference (% change): -92%. 

State: Iowa; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $264,438; 
Without agents' and brokers' commissions and fees: $149,567; 
Difference (% change): -43%. 

State: Kansas; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,043,320; 
Without agents' and brokers' commissions and fees: $1,000,904; 
Difference (% change): -75%. 

State: Kentucky; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $14,405,533; 
Without agents' and brokers' commissions and fees: $3,468,822; 
Difference (% change): -76%. 

State: Louisiana; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,473,246; 
Without agents' and brokers' commissions and fees: $1,079,876; 
Difference (% change): -56%. 

State: Maine; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $501,240; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: Maryland; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $13,143,978; 
Without agents' and brokers' commissions and fees: $7,579,820; 
Difference (% change): -42%. 

State: Massachusetts; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $40,126,759; 
Without agents' and brokers' commissions and fees: $28,483,017; 
Difference (% change): -29%. 

State: Michigan; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $18,810,417; 
Without agents' and brokers' commissions and fees: $6,413,173; 
Difference (% change): -66%. 

State: Minnesota; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,435,260; 
Without agents' and brokers' commissions and fees: $842,951; 
Difference (% change): -41%. 

State: Mississippi; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $5,851,556; 
Without agents' and brokers' commissions and fees: $2,523,128; 
Difference (% change): -57%. 

State: Missouri; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $19,186,416; 
Without agents' and brokers' commissions and fees: $2,629,432; 
Difference (% change): -86%. 

State: Montana; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,537,571; 
Without agents' and brokers' commissions and fees: $893,756; 
Difference (% change): -42%. 

State: Nebraska; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $2,000,151; 
Without agents' and brokers' commissions and fees: $1,049,561; 
Difference (% change): -48%. 

State: Nevada; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,159,345; 
Without agents' and brokers' commissions and fees: $1,280,956; 
Difference (% change): -69%. 

State: New Hampshire; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,171,335; 
Without agents' and brokers' commissions and fees: $342,650; 
Difference (% change): -71%. 

State: New Jersey; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $10,768,382; 
Without agents' and brokers' commissions and fees: $651,598; 
Difference (% change): -94%. 

State: New Mexico; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $239,567; 
Without agents' and brokers' commissions and fees: $63,448; 
Difference (% change): -74%. 

State: New York; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $35,290,183; 
Without agents' and brokers' commissions and fees: $6,989,447; 
Difference (% change): -80%. 

State: North Carolina; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $10,478,768; 
Without agents' and brokers' commissions and fees: $1,736,726; 
Difference (% change): -83%. 

State: North Dakota; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $19,792; 
Without agents' and brokers' commissions and fees: $16,419; 
Difference (% change): -17%. 

State: Ohio; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $486,681; 
Without agents' and brokers' commissions and fees: $328,436; 
Difference (% change): -33%. 

State: Oklahoma; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $16,009,195; 
Without agents' and brokers' commissions and fees: $2,931,977; 
Difference (% change): -82%. 

State: Oregon; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $3,327,997; 
Without agents' and brokers' commissions and fees: $2,085,421; 
Difference (% change): -37%. 

State: Pennsylvania; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $6,877,987; 
Without agents' and brokers' commissions and fees: $2,525,182; 
Difference (% change): -63%. 

State: Rhode Island; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $18,053; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: South Carolina; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $6,169,507; 
Without agents' and brokers' commissions and fees: $415,006; 
Difference (% change): -93%. 

State: South Dakota; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $41,240; 
Without agents' and brokers' commissions and fees: $30,962; 
Difference (% change): -25%. 

State: Tennessee; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $5,676,201; 
Without agents' and brokers' commissions and fees: $1,224,962; 
Difference (% change): -78%. 

State: Texas; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $46,695,311; 
Without agents' and brokers' commissions and fees: $8,049,784; 
Difference (% change): -83%. 

State: Utah; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $4,665,982; 
Without agents' and brokers' commissions and fees: $277,430; 
Difference (% change): -94%. 

State: Vermont; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $126,810; 
Without agents' and brokers' commissions and fees: $0; 
Difference (% change): -100%. 

State: Virginia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $11,874,030; 
Without agents' and brokers' commissions and fees: $3,557,241; 
Difference (% change): -70%. 

State: Washington; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $806,496; 
Without agents' and brokers' commissions and fees: $746,827; 
Difference (% change): -7%. 

State: West Virginia; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,120,757; 
Without agents' and brokers' commissions and fees: $487,604; 
Difference (% change): -56%. 

State: Wisconsin; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $3,567,932; 
Without agents' and brokers' commissions and fees: $227,232; 
Difference (% change): -94%. 

State: Wyoming; 
Rebate amounts (in dollars): 
Actual amount insurers paid: $1,477,087; 
Without agents' and brokers' commissions and fees: $858,543; 
Difference (% change): -42%. 

Source: GAO analysis of CMS data. GAO-14-580. 

Notes: The markets include large group, small group, and individual. 
Under PPACA, a small employer is defined as having from 1 to 100 
employees and a large employer is defined as having 101 or more 
employees. However, in 2012 states had the option of continuing to 
define small and large employers with definitions established in 
federal law prior to PPACA (small group as having a maximum of 50 and 
large group as having 51 or more employees). Starting in 2016, states 
must define small and large employers under the PPACA definition. See 
Pub. L. No. 111-148, §1304(b), 124 Stat. 172 (codified at 42 U.S.C. § 
18024(b)); 45 C.F.R. § 158.103 (2013). The individual market includes 
plans sold by insurers directly to individuals. Insurers operating in 
the insular areas of American Samoa, Guam, Northern Mariana Islands, 
Puerto Rico, and United States Virgin Islands were also subject to the 
PPACA medical loss ratio requirements. 

[End of table] 

[End of section] 

Appendix V: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John E. Dicken, (202) 512-7114 or DickenJ@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Gerardine Brennan, Assistant 
Director; George Bogart; Romonda McKinney Bumpus; Pamela Dooley; 
Julianne Flowers; and Laurie Pachter made key contributions to this 
report. 

[End of section] 

Footnotes: 

[1] Pub. L. No. 111-148, §§ 1001(5), 10101(f), 124 Stat. 119, 130, 
136, 885 (2010) (adding § 2718 to the Public Health Service Act) 
(codified at 42 U.S.C. § 300gg-18). 

[2] For purposes of this report, the term "medical claims" is 
synonymous with the term "clinical services" as used in the law. See 
42 U.S.C. § 300gg-18(a)(1); 45 C.F.R. § 158.140 (2013). 

[3] CMS, The 80/20 Rule: How Insurers Spend Your Health Insurance 
Premiums (Baltimore, Md.: Feb. 15, 2013). 

[4] In general, insurers in the large group market must meet a minimum 
MLR of 85 percent, and insurers in the small group and individual 
markets must meet a minimum MLR of 80 percent. This difference 
reflects the assumption that administrative expenses per enrollee are 
typically lower in the large group market. 

[5] Insurers may implement quality improvement activities such as 
wellness assessments and care coordination plans that are designed to 
increase the likelihood of desired health outcomes for their enrollees. 

[6] 45 C.F.R. §§ 158.150(c)(11), 158.160(b)(2)(iv) (2013) (relating to 
marketing expenses and fees and commissions, respectively). Agents and 
brokers--which are also referred to as "producers" in the insurance 
industry--assist consumers and employers in choosing and enrolling in 
health insurance plans. They also provide assistance after enrollment 
with resolving claims issues and making enrollment changes. 

[7] Since PPACA established the MLR requirements several bills have 
been introduced in the Congress to exclude agent and broker 
compensation from the calculation of the MLR, thereby providing that 
such compensation no longer be considered a non-claims cost. This 
change could decrease the incentive to reduce the use of, or 
compensation to, agents and brokers. See H.R. 1206, 112TH Cong. § 3 
(2011); S. 2068, 112TH Cong. § 3 (2012); S. 2288, 112TH Cong. § 3 
(2012); S. 650, 113TH Cong. § 3 (2013); and H.R. 2328, 113TH Cong. § 3 
(2013). As of June 2014, none of these bills had been enacted into law. 

[8] Throughout this report, references to "excluding" or "subtracting" 
agents' and brokers' commissions and fees from the MLR calculation or 
formula means, more specifically, excluding these expenses from the 
denominator of the MLR formula. The MLR formula is shown in figure 1 
later in this report. 

[9] Within CMS, the Center for Consumer Information and Insurance 
Oversight is responsible for collecting the MLR data from insurers and 
overseeing the PPACA MLR requirements. Insurers reported their 2011 
and 2012 MLR data to CMS by June 2012 and June 2013, respectively. The 
MLR data are based on the insurers' experience for the prior calendar 
year. 

[10] Premium surplus includes profit and other reserved capital. 

[11] Because some insurers have employees who sell their plans, we 
conducted a separate calculation of rebates taking into account this 
type of compensation. We used the MLR data to subtract from the MLR 
formula the amount of salaries and benefits that insurers paid to such 
employees, as well as the commissions and fees that insurers paid to 
agents and brokers that they do not employ. 

[12] The eight insurers we interviewed included seven insurance groups 
that each operated two or more insurance companies and one insurance 
company that was not part of a larger insurance group. Many, but not 
all, insurance companies are part of a larger insurance group. 

[13] While not-for-profit insurers may make profits to help them stay 
in business, the profits must go back into the organization. 

[14] We asked insurers about the effects of the PPACA MLR requirements 
on their business practices from 2011, the first year they were 
subject to the PPACA MLR requirements, through 2014. 

To obtain further background information on the PPACA MLR 
requirements, we also interviewed officials from two consumer groups, 
a trade association representing the health insurance industry, and 
three trade associations representing the agent and broker industry. 

[15] The PPACA MLR requirements do not apply to certain plans such as 
self-funded plans, in which employers assume the risk for paying for 
medical claims. Medicare Advantage Plans and Medicare Part D 
prescription drug plans are subject to separate PPACA MLR 
requirements, beginning in 2014. See Pub. L. No. 111-152, § 1103, 124 
Stat. 1029, 1047 (2010) (codified at 42 U.S.C. § 1395w-27(e)) 
(pertaining to MA plans and, by reference through 42 U.S.C. § 1395w-
112(b)(3), to Medicare Part D plans). 

[16] See Pub. L. No. 111-148, § 1304(b), 124 Stat. 172 (codified at 42 
U.S.C. § 18024(b)); 45 C.F.R. § 158.103 (2013). 

[17] Insurers include medical claims incurred during the applicable 
calendar year and paid through March 31 of the following year. 
Insurers also include unpaid claim reserves for claims incurred during 
the applicable calendar year. 

[18] See 45 C.F.R. §§ 158.150(b), 158.151 (2013). CMS included as QI a 
portion of those expenses for converting disease classification codes 
(i.e., ICD-10), starting in 2012. 

[19] An employee of an insurer who sells health plans would typically 
only sell those plans the employer offers, while agents and brokers 
who are not employed by an insurer would generally sell the health 
plans of various insurers. 

[20] See 45 C.F.R. § 158.160(b)(2) (2013). Insurers can exclude from 
their MLRs certain community benefit expenditures for the objectives 
of improving access to health services, enhancing public health and 
relief of government burden, limited to specified amounts. 45 C.F.R. § 
158.162(b)(1)(vii), (viii) and (c) (2013). Insurers would include any 
additional community benefit expenditures as part of the non-claims 
cost category of other general and administrative expenses. 

[21] Premiums in the denominator also include any subsidies the 
insurer has received as part of federal or state high-risk pools, such 
as federal funds provided to insurers who participated in PPACA's Pre-
Existing Condition Insurance Plan program. This program was designed 
to extend health insurance to high-risk individuals with pre-existing 
medical conditions and ended in 2014. Medical claims for high-risk 
pools are also included in insurers' MLR numerator. 

[22] For more information about credibility adjustments, see GAO, 
Private Health Insurance: Early Experiences Implementing New Medical 
Loss Ratio Requirements, [hyperlink, 
http://www.gao.gov/products/GAO-11-711] (Washington, D.C.: July 29, 
2011). 

[23] Insurers with 1,000 to less than 75,000 enrollees in 2011 and 
2012 combined received a credibility adjustment. If these insurers 
owed rebates in 2011 the rebates were added to their claims in 2012. 

[24] PPACA provides HHS with authority to adjust the 80 percent MLR 
standard for the individual market if the Secretary of HHS determines 
that the standard could destabilize the individual market in a given 
state. Pub. L. No. 111-148, §§ 10001(5). 10101(f), 124 Stat. 136, 885 
(codified at 42 U.S.C. § 300gg-18(b)(1)(A)(ii)). To date, seven states 
have been granted such adjustments: Georgia, Iowa, Kentucky, Maine, 
Nevada, New Hampshire, and North Carolina. Each state's adjustment 
allows for a lower MLR standard and is temporary. 

[25] This figure also includes sales agents in types of insurance 
other than health, such as life and property. Agents may have 
licensure in more than one type of insurance. 

[26] In 2014, agents and brokers who completed applicable training may 
provide assistance to consumers with the PPACA-mandated state-based 
and federally facilitated health care exchanges, for example, by 
helping consumers enroll in a qualified health plan. The exchanges are 
marketplaces where individuals can compare and select among qualified 
health plans offered by participating private issuers of health 
coverage. 

[27] Because our analyses are based on separate MLRs that each insurer 
reports for each market (i.e., individual, small group, or large 
group) and state combination, "insurers" refer to these different MLR 
reporting combinations. 

[28] Net premiums is the amount of insurers' premiums after 
subtracting the insurer's federal and state taxes and licensing or 
regulatory fees. Net premiums is the denominator in the PPACA MLR 
formula. 

[29] Premium surplus is the amount remaining after subtracting from 
net premiums the costs associated with medical claims, quality 
improvement activities, as well as non-claims costs. 

[30] Because state regulators require insurers to maintain specific 
levels of capital to conduct business, insurers may maintain some of 
their profits for this purpose. Insurers that operate in more than one 
market within a state may have had profits in some markets within a 
state and not others. 

[31] We did not analyze community expenditures as a separate category 
of non-claims costs. Insurers may have excluded a certain amount of 
such expenses from the denominator of their MLRs, and any additional 
amounts would be included in the non-claims cost category of other 
general and administrative expenses. 

[32] The total rebate amounts for 2011 and 2012 are somewhat higher 
than those CMS reported. According to CMS officials, the rebate 
amounts CMS reported for 2011 and 2012 did not include the rebates 
that insurers paid for plans that had annual coverage limits of 
$250,000 or less. See CMS, 2012 MLR Rebates by State, accessed April 
23, 2014, [hyperlink, http://www.cms.gov/CCIIO/Resources/Data-
Resources/Downloads/2012-mlr-rebates-by-state-08-01-2013.pdf], and 
CMS, The 80/20 Rule: How Insurers Spend Your Health Insurance 
Premiums, accessed April 23, 2014, [hyperlink, 
http://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-report-02-15-
2013.pdf]. 

[33] We calculated the average rebate amount by dividing the total 
amount of rebates insurers paid by the total number of individuals 
(including dependents) enrolled in their plans. 

[34] Insurers will calculate their MLRs based on data from a 3-year 
period, beginning in 2013. This may affect the amount of rebates that 
insurers must pay. 

[35] To perform our calculations, we subtracted from the MLR 
denominator agents' and brokers' fees and commissions for each year 
and recalculated the MLR with the new denominator. We determined 
whether the insurer would have met or exceeded the applicable PPACA 
MLR standard, based on the recalculated MLR, and if an insurer would 
not have met or exceeded the standard, we calculated a rebate amount. 
To determine the rebate amount, we multiplied the difference between 
the recalculated MLR and the applicable standard by the amount of 
premium, after subtracting taxes and agents' and brokers' fees and 
commissions. 

[36] We also performed a calculation that excluded the salaries and 
benefits that insurers pay their employees who sell their plans, in 
addition to the fees and commissions that insurers pay agents and 
brokers whom they do not employ, and found further reductions in the 
recalculated rebate amounts. Total rebate amounts would have been 
further reduced to about $213 million in 2011 and about $115 million 
in 2012. 

[37] For example, if insurers had increased the fees and commissions 
that they pay agents and brokers because the fees and commissions were 
excluded from the MLR formula (without increasing their premiums by 
the same amount), then rebates would have decreased more than our 
estimates. This is because insurers' MLRs would have increased more 
than the increases we calculated. 

[38] See Pub. L. No. 111-148, §§ 1201, 1563(c), 10103, 10107, 124 
Stat. 154, 264, 892, 911 (codified at 42 §§ 300gg-1 et seq.). 

[39] The purpose of this reinsurance program is to stabilize premiums 
by partially offsetting claims for high-risk individuals in the 
individual market. All insurers must make contributions, beginning in 
January 2014, and those in the individual markets are eligible for 
payments. This program is temporary and will operate from 2014 to 
2016. See Pub. L. No. 111-148, §§ 1341, 10104(r), 124 Stat. 208, 906 
(codified at 42 U.S.C. § 18061). 

[40] PPACA requires that certain health plans be offered on a 
guaranteed-issue basis, that is, that an insurer accept every 
applicant and meet coverage requirements such as providing women's 
preventative services (e.g., well-women visits), without cost sharing 
for the enrollee. 

[41] We asked insurers about their business practices from 2011, when 
the PPACA MLR requirements took effect, to the present. This time 
period is broader than the period for which we analyzed MLR data. 

[End of section] 

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