Annual MLR Report

CENTERS FOR MEDICARE & MEDICAID SERVICES (CMS)
MEDICAL LOSS RATIO (MLR) ANNUAL REPORTING FORM
FOR THE 2012 MLR REPORTING YEAR
FILING INSTRUCTIONS FOR ALL PARTS
Contents
INSTRUCTIONS FOR THE 2012 MLR REPORTING YEAR ............................................................. 3
CHANGES TO THE 2012 MLR ANNUAL REPORTING FORM ....................................................... 4
GENERAL INSTRUCTIONS ................................................................................................................. 5
COLUMN DEFINITIONS FOR MEDICAL LOSS RATIO ANNUAL REPORTING FORM– PARTS
1 AND 2 ................................................................................................................................................... 9
INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 1, Summary of Data ............ 14
Section 1 – Premium ..................................................................................................................... 14
Section 2 – Claims ........................................................................................................................ 15
Section 3 – Federal and State Taxes and Licensing or Regulatory Fees ...................................... 16
Section 4 - Health Care Quality Improvement Expenses Incurred ............................................... 18
Section 5 – Non-Claims Costs ...................................................................................................... 22
Section/Line 6 – Income from fees on uninsured plans ................................................................ 24
Section 7 - Other indicators or information .................................................................................. 24
Section 8 – Net investment income and other gain/(loss) ............................................................. 25
Section 9 – Other Federal income taxes........................................................................................ 25
INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 2, Premium and Claims ...... 26
Section 1 – Health Premiums Earned............................................................................................ 26
Section 2 - Claims ......................................................................................................................... 29
INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 3, Expense Allocation
Methodology .......................................................................................................................................... 36
INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 4, MLR and Rebate
Calculation ............................................................................................................................................. 38
Section 1- Medical Loss Ratio Numerator .................................................................................... 39
Section 2 - Medical Loss Ratio Denominator ............................................................................... 41
Section 3 - Credibility Adjustment ............................................................................................... 41
Section 4 - Medical Loss Ratio Calculation.................................................................................. 43
Section 5 - MLR Rebate Calculation ............................................................................................ 44
INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 5, Rebate Disbursement ...... 46
Section/Line 1 – Number of policies/certificates .......................................................................... 46
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Section 2 - Number of policyholders/subscribers owed rebates ................................................... 46
Section 3 – Total amount of rebates .............................................................................................. 47
Section 4 – Prior MLR reporting year rebates .............................................................................. 47
INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 6, Additional Responses ..... 49

PRA Disclosure Statement
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for improving this form, please write to: CMS, 7500 Security Boulevard, Attn: PRA Reports Clearance Officer, Mail Stop
C4-26-05, Baltimore, Maryland 21244-1850.
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INSTRUCTIONS FOR THE 2012 MLR REPORTING YEAR
This filing is the report to the Secretary required by section 2718 of the Public Health Service Act
(PHS Act), including the elements that make up the medical loss ratio and calculation and provision of
rebates to enrollees. The data included in this MLR Annual Reporting Form (MLR Form) are the
exact data that will be used to calculate an issuer’s medical loss ratio (MLR) and rebates, if any, under
section 2718 of the PHS Act and the implementing regulation, codified at 45 CFR Part 158.
The MLR implementing regulations can be found at:
http://www.cciio.cms.gov/resources/regulations/index.html#mlr.
The annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012. Filing will require a one-time registration by the issuer, with the CMS
Health Insurance Oversight System (HIOS) to submit its report to the Secretary. If an issuer registered
for the MLR module in HIOS for the 2011 MLR reporting year, it does not need to reregister, but will
need to confirm or update its issuer associations.
References are made in these instructions to the National Association of Insurance Commissioners
(NAIC) Statements of Statutory Accounting Principles (SSAP) and Supplemental Health Care Exhibit
(SHCE) (as filed by many issuers with the NAIC) in effect for the MLR reporting year. These
references are solely for the convenience of the filer in identifying the information needed for this
MLR Form.
These Filing Instructions are to be used in completing the MLR Form by all health insurance issuers
(issuers) offering health insurance coverage subject to section 2718 of the PHS Act and the MLR
implementing regulations. All terms used in these Filing Instructions that are not defined here have the
meaning used in 45 CFR Part 158 and the PHS Act.
The term “health insurance coverage” means benefits consisting of medical care (provided directly,
through insurance or reimbursement, or otherwise and including items and services paid for as
medical care) under any hospital or medical service policy or certificate, hospital or medical service
plan contract, or health maintenance organization contract offered by a health insurance issuer. The
definition includes any insurance product, such as drug, chiropractic, or mental health coverage,
whether sold as a stand-alone product or in conjunction with any other health insurance coverage,
unless specifically identified as “excepted benefits” by the PHS Act.
An MLR Form must be prepared and submitted for each State in which the issuer has written direct
health insurance coverage or has direct amounts paid, incurred or unpaid for the provision of health
care services. (Note: The experience of expatriate plans is aggregated on a national basis, and for the
2012 MLR reporting year should be reported only in the 12/31 column of Parts 1 and 2 of the “Grand
Total” MLR Form. Expatriate experience should not be reported in Parts 4, 5 or 6 of the MLR Form.
See Changes to the 2012 MLR Annual Reporting Form, below.) In addition, a schedule must be
prepared and submitted that contains the grand total (GT) for the issuer. An issuer required to file the
MLR Form must complete Parts 1 and 2 for each State in which the issuer provides any health
insurance coverage, even if a particular State will show $0 earned premium in Part 1 (see the 2%
instruction below). Also, Parts 4 through 6 must be completed for any State in which there are nonzero amounts in Part 1. Part 3 is completed in the “Grand Total” MLR Form only.
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CHANGES TO THE 2012 MLR ANNUAL REPORTING FORM
In order to simplify the MLR annual reporting process and MLR Form, several changes have been
made to the Excel workbook since the 2011 MLR reporting year. Some additional changes have been
made to incorporate changes in 45 CFR Part 158 that are effective for the 2012 MLR reporting year.
Below are the most significant changes.
No Calculated Fields: No fields or cells in the 2012 MLR Form that are for user input or
calculations are locked or contain automatic calculations.. This should make it easier for an
issuer to automate its internal process for submitting the MLR annual report for multiple states.
Dual Contracts columns: To increase clarity and transparency, columns were added for dual
contract information with affiliates, as a subset of the data reported in the 3/31 columns.
Separation of Parts 1 and 2: For the 2011 MLR reporting year, Parts 1 and 2 were included
on the same worksheet within the workbook. For the 2012 reporting year, Parts 1 and 2 each
has its own worksheet. Part 1is Data Development – Summary of Data and Part 2 is Data
Development – Premium and Claims.
Expatriate Plans: For the 2012 MLR reporting year, expatriate plans are considered
compliant with MLR requirements (see Affordable Care Act Implementation FAQs – Set 13
published March 8, 2013. For the 2012 MLR reporting year, issuers with only expatriate
business are not required to file an MLR Form. Issuers with health insurance coverage in other
markets should report their expatriate experience only in the 12/31 column of Parts 1 and 2 of
the “Grand Total” page of the MLR Form, and leave all other expatriate columns in the MLR
Form blank.
Removal of Part 3 Expense Allocation Report: For the 2011 MLR reporting year, issuers
completed Part 3 Expense Allocation Report, and the corresponding cells of Part 1 were prepopulated with amounts contained in Part 3. For the 2012 MLR reporting year, the prior year’s
Part 3 has been eliminated and issuers will only enter the expense amounts into the appropriate
cells of Parts 1.
Renumbering of Reports: Since the Part 3 Expense Allocation Report has been removed, the
remainder of the MLR Form has been renumbered. For the 2012 MLR reporting year, Part 3 is
the Expense Allocation Methodology Report, Part 4 is the MLR and Rebate Calculation
Report, Part 5 is the Rebate Disbursement Report and Part 6 requests some additional
information to explain some of the data submitted.
Part 6 Additional Responses: A worksheet has been added to the 2012 MLR Form to further
clarify and describe some of the data reported in other parts of the MLR Form.
Formulas: Since the workbook will no longer automatically calculate any fields, tools will be
provided to inform issuers about key data calculations related to MLR reporting. These tools
will be available through the HIOS MLR module and on the CCIIO website.

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GENERAL INSTRUCTIONS
Reinsurance
Experience under a 100% assumption reinsurance agreement (with a novation) must be
reported by the assuming issuer as direct business, for the entire MLR reporting year during
which the policies are assumed and must not be reported by the ceding issuer.
Reporting of 100% indemnity reinsurance and administrative agreements is limited to those
agreements both entered into and effective prior to March 23, 2010, where the assuming entity
is responsible for 100% of the ceding entity’s financial risk and takes on all of the
administration of the block of business. Experience under those indemnity reinsurance and
administrative agreements must be reported by the assuming issuer as direct business, and
must not be reported by the ceding issuer.
If a reinsurance arrangement does not meet the exact criteria specified in the two preceding
paragraphs, the experience under that reinsurance arrangement must be reported by the ceding
issuer and not by the assuming issuer.
Closed Blocks of Business
Section 2718 of the Public Service Health Act requires all health insurance issuers offering
health insurance coverage to submit an MLR report. CMS will use its enforcement discretion
and will not initiate an enforcement action if an issuer of group or individual health insurance
coverage fails to submit a full MLR report and its only health insurance coverage exists in
grandfathered plans in small closed blocks. To qualify for this limited exception, the issuer’s
CFO and CEO must attest to and provide the following information regarding the applicable
MLR reporting year:
1. The issuer has ceased offering health insurance coverage, as defined by §2791(b)(1) of
the Public Service Health Act, in the small group, large group, and individual health
insurance markets in every state in which it is licensed to offer health insurance
coverage;
2. The issuer has only grandfathered health plans (as defined in 45 CFR §147.140(a)) in
closed blocks of business that are in run-off;
3. The issuer did not submit a Supplemental Health Care Exhibit (SHCE) or other similar
state filing for business during the applicable MLR reporting year, has been exempted
from filing a SHCE or similar state filing by the state in which it is domiciled, and
submits to CMS evidence of this exemption on state letterhead. If the issuer is not
subject to a SHCE or similar state filing requirement, this criterion is not applicable;
4. The issuer has less than 1,000 life years nationwide (combined for all health insurance
coverage) for the MLR reporting year.
5. The issuer has non-credible experience in each state market in which it provides
coverage. The issuer must report the number of life-years in each state market for each
MLR reporting year that is aggregated to determine whether the issuer has non-credible
experience. For example, an issuer with 700 life-years in the 2011 MLR reporting year
and 600 life-years in the 2012 MLR reporting year for the same state market would be
partially credible in the 2012 MLR reporting year. (45 CFR §158.230 and 158.231.)

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Like all issuers that are subject to the MLR reporting requirements, a company that meets all
of the criteria described above must register with the MLR module of CMS’s Health Insurance
Oversight System (HIOS), and complete, update or confirm the “company issuer association”
form in HIOS. A company that meets all of the above criteria may select “yes” in the “small
closed blocks of business” box on the HIOS company issuer association confirmation. When a
company that selects “yes” in the “small closed blocks of business” box downloads the MLR
reporting form from HIOS, it may complete only Part 4, Line 3.1 of the MLR reporting form
for every State and market in which it has health insurance coverage. The company should use
HIOS’ “upload supplemental material” function to submit a statement that affirms the criteria
described above. The company should also upload any State Supplemental Health Care
Exhibit (or other similar State required filing) exemption it has received from its State of
domicile. The company should then complete the HIOS attestation process.
Issuers satisfying the above criteria may instead choose to complete the full MLR form for
their grandfathered plans in closed blocks of business. The option described in this closed
block of business policy is intended reduce MLR reporting requirements.
If CMS determines that an issuer does not satisfy the criteria described above, CMS will notify
the issuer that it must complete the full MLR reporting form as specified in 45 CFR Part 158.

Aggregate 2% Rule
If the issuer’s total earned premium for health insurance coverage in the individual, small
group and large group markets, including any active and credible “mini-med” policies for a
particular State, is less than 2% of its total health earned premium for that State, the issuer may
choose to not complete Columns 35 and 36 of Parts 1 and 2 for that State, and instead combine
Government Program Plans and Other Health Business experience (Columns 35 and 36) in
Column 37 of Parts 1 and 2.

Deferred Business
If, for any aggregation as defined in 45 CFR §158.120, 50% or more of the total earned
premium for an MLR reporting year is attributable to newly issued policies with less than 12
months of experience in that MLR reporting year, then the experience of these policies may be
deferred, at the option of the issuer. If an issuer defers the reporting of newer business as
provided in this paragraph, then the experience of such policies must be excluded from the
MLR reporting year in which it occurred and must be added to the experience reported in the
following MLR reporting year.

Allocation of Expenses
Each expense must be reported under only one type of expense, unless a portion of the expense
fits under the definition of or criteria for one type of expense and the remainder fits into a
different type of expense, in which case the expense must be pro-rated between the two (or
more) types of expenses. Expenditures that benefit more than one affiliate may be allocated, on
a pro rata basis, between the affiliates that benefit from these expenditures. Expenditures that
benefit all lines of business or products, including but not limited to those that are for or
benefit self-funded plans, must be reported on a pro rata basis.
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Aggregation of Experience
An issuer’s experience, aggregated by individual, small group and large group markets, with
respect to each policy must be included on the report submitted with respect to the State where
the policy was issued, except as specified below.
Group Coverage in Multiple States:
Group coverage issued by a single issuer to an employer that covers employees in multiple
States must be reported for the State where the contract is sitused. Situs of the contract is the
jurisdiction in which the contract is issued or delivered, as stated in the contract.
Dual-Contract Group Health Coverage:
If an issuer has a group health plan which provides coverage for in-network coverage only and
an affiliate issuer provides only out-of-network coverage solely for the purpose of providing a
group health plan that offers both in-network and out-of-network benefits, the issuer may
choose to treat the out-of-network experience of the affiliate that provides the out-of-network
coverage as if it were related to the contract providing the in-network coverage. If an issuer
chooses this method of aggregation, it must do so for a minimum of three consecutive
reporting years and the affiliate that provides the out-of-network coverage must not report this
experience. After an issuer applies this method for the initial three consecutive reporting years,
the issuer may either continue to apply this method for any number of additional consecutive
reporting years, or may choose to discontinue applying this method.
Individual Business through an Association:
For individual business sold through an association, the issuer shall include the experience in
the State report for the issue State of the certificate of coverage.
Employer Business through Group Trust, Association or MEWA:
For employer business issued through a group trust, the issuer shall include the experience in
the State report for the State where the employer has its principal place of business. For
employer business issued through a multiple employer welfare association (MEWA), the issuer
shall include the experience in the State report for the State where the MEWA has its principal
place of business (if the MEWA is the policyholder). For employer business issued through a
non-MEWA association, experience with respect to each employer shall be reported as large
group or small group based on the size of each employer and be reported in each State based
upon the aggregation rules for employer based insurance.
Definition of Small Group and Large Group:
The large group and small group markets are defined as those where health insurance coverage
is obtained by a large or small employer, respectively. Large employer and small employer are
defined by the number of employees employed; a small employer has 1 to 100 employees, but
if a State uses “50” employees as the upper limit for a small employer, then “50” may be
substituted for “100” employees until 2016. A sole proprietor or a sole proprietor’s spouse is
not considered a group of one. An employer’s number of employees is determined by
averaging the total number of all employees employed on business days during the preceding
calendar year. This includes each full-time, part-time and seasonal employee.
An issuer must report on this MLR Form only the business issued by the reporting entity. Business
that is written by an unaffiliated entity as part of a package provided to the enrollee (e.g., inpatient
7

coverage written by the reporting entity, outpatient coverage written by an unaffiliated separate entity)
must not be included in this MLR Form.
For those issuers of health insurance coverage in Massachusetts’ individual and small group markets
that choose to merge their markets in accordance with Massachusetts law, please indicate “Yes” in the
Merged Markets – Indv/SmGrp (MA only) box at the top of the MLR Form. Please report all
experience separately for the individual and small group markets, and combine it only in MLR
numerator and denominator fields (Part 4 Lines 1.5 and 2.3).
Health Insurance Coverage:
Do not include health insurance coverage specifically not subject to section 2718 of the PHS Act, such
as government-sponsored programs, (e.g., Medicare (Title XVIII, including Medicare Advantage),
Medicaid (Title XIX), State Children’s Health Insurance Program (SCHIP) (Title XXI), and other
Federal or State government-sponsored coverage (other than the Federal Employees Health Benefits
Program or State government sponsored coverage for State employees or retirees), or uninsured
business. Stop (or excess) loss coverage for self-insured groups should be reported in Parts 1 and 2 –
Other Health Business (business excluded by statute).

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COLUMN DEFINITIONS FOR MEDICAL
REPORTING FORM– PARTS 1 AND 2

LOSS

RATIO

ANNUAL

The annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012.
Health insurance coverage, Columns 1 through 34, includes policies that provide medical coverage,
including office visits, hospital, surgical and major medical (illness and injury). Include risk contracts
and the Federal Employees Health Benefit Plan (FEHBP). Exclude mini-med plans and expatriate
plans from Columns 1 through 15 since they are reported separately. Mini-med plan experience is
reported in Columns 16-24 of each State MLR Form. Columns 25-34 on the MLR Form are labeled
for expatriate plan experience. However, for the 2012 MLR reporting year, expatriate plans should be
reported only in the 12/31 columns (Columns 25 and 30) of Parts 1 and 2 of the “Grand Total” page
of the MLR Form and all other expatriate columns in the MLR Form should be left blank.)
The experience of expatriate plans is aggregated on a national basis.
Do not include in Columns 1-34 business specifically included in Columns 35-38 (e.g., uninsured or
self-funded business, Medicare (Title XVIII, including Medicare Advantage), Medicaid (Title XIX),
vision only, dental only, State Children’s Health Insurance Program (SCHIP) (Title XXI), other
Federal or State government-sponsored coverage (other than the Federal Employees Health Benefits
Program or State government sponsored coverage for State employees or retirees), and short-term,
limited duration insurance as further defined in the PHS Act). The experience for pharmacy,
chiropractic, or mental health coverage, whether sold as a stand-alone product or in conjunction with
any other health insurance coverage, should be reported with the health insurance coverage for the
applicable market, as these are not “excepted benefits” under the PHS Act.
The experience of stop loss or excess of loss coverage for self-funded groups should be reported in
Parts 1 and 2, Column 36 – Other Health Business Plans (business excluded by statute). Column 36
includes information reported in Column 11 of the SHCE.
For any data element that is not separately reported in the financial statement filings to the issuer’s
regulatory authority, an issuer does not need to separately report that element in the “12/31” column of
the MLR Form. However, an issuer must separately report that data element in the “3/31” column as
required by 45 CFR Part 158 and as instructed in the MLR Form instructions. For example, an issuer
may not need to report the amount of contingent benefit and lawsuit reserves in Part 2 Line 2.13 in the
“12/31” column, but must report such amounts in the “3/31” column. An issuer must still report, in the
detail provided by the MLR form, the amounts for premiums and unearned premium reserves, taxes
and fees, claims and claims-related reserves, quality improving activities, and non-claims costs, in
both the “12/31” and the “3/31” columns, to the extent the issuer reports such amounts to the issuer’s
regulatory authority.
Columns 1, 6, 11, 16, 19, 22, 25, 30, 35, 36, 37, and 38 – Business as of 12/31 of the MLR reporting
year
Financial information reported for the 12/31 columns are to equal the exact amounts that were
reported directly to the State regulatory authority of the issuer, including amounts that may
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have been amended in the SHCE the issuer submitted to the NAIC prior to filing the 2012
MLR Form.
Include:
Experience of policies in each of the relevant markets for the MLR reporting
year, as reported as of December 31, to the department of insurance in the issuer’s State of
domicile or as filed on the NAIC SHCE filing for the MLR reporting year regardless of
incurred date.
For any data element that is not separately reported in the NAIC SHCE or separately reported
elsewhere to the department of insurance of the issuer’s State of domicile, an issuer does not
need to separately report that element in the “12/31” column of the MLR Form. However, an
issuer must separately report those data elements in the “3/31” column as provided in 45 CFR
Part 158 and as instructed in the MLR Form Instructions.
Columns 2, 7, 12, 17, 20, 23 – Business as of 3/31 of subsequent MLR reporting year
(Note: Columns 26 and 31 are labeled for expatriate experience, but for the 2012 MLR
reporting year should be left blank.)
Financial Information reported in the 3/31 columns should equal the amount of each element
related specifically to experience in the 2012 MLR reporting year and paid through March 31
of the subsequent reporting year (incurred in 12, paid or received in 15), plus any provision for
items properly allocable to the 2012 MLR reporting year but not yet paid as of 3/31 of the
following year. For example, these columns could include differences from the 12/31 columns
in the upper limit for a small group and the lower limit for a large group, if state group size
regulations differ from federal group size regulations. (See the Definitions of Small Group and
Large Group, in the General Instructions above.) If the issuer elects to treat the out-of-network
experience of an affiliate that provides the out-of-network coverage as if it were related to the
contract providing the in-network coverage, the issuer must include such out-of-network
experience in the 3/31 columns, as well as separately report it in the Dual Contract columns
(see the column definition below).
Include:
Experience of policies in each market, incurred, paid or received relevant only
to the MLR reporting year, reported as of March 31 of the subsequent MLR reporting year.
Columns 3, 8, 13, 18, 21, 24 – Dual Contract
(Note: Columns 27 and 32 are labeled for expatriate experience, but for the 2012 MLR
reporting year should be left blank.)
Include:
Experience reported in columns 2, 7, 12, 17, 20, and 23 that is attributable to
dual contracts. Note that these amounts are a subset of what is reported in columns 2, 7, 12,
17, 20, and 23.
The issuer may choose to treat the out-of-network experience of an affiliate that provides the
out-of-network coverage as if it were related to the contract providing the in-network coverage.
“Experience” means all of the elements used to calculate the numerator and denominator of the
MLR calculation.
Columns 4, 9 and 14 - Deferred Newer Business from prior MLR reporting year
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(Note: Columns 28 and 33 are labeled for expatriate experience, but for the 2012 MLR
reporting year should be left blank.)
Include:
Experience from policies for the relevant market newly issued in the 2011MLR
reporting year (PY1), previously deferred, as provided in the General Instructions. Data
elements constituting adjusted incurred claims for business deferred from the preceding MLR
reporting year should be restated as of 3/31 of the year following the MLR reporting year.
Columns 5, 10 and 15 - Deferred Newer Business for the MLR reporting year
(Note: Columns 29 and 34 are labeled for expatriate experience, but for the 2012 MLR
reporting year should be left blank.)
Include:
Policies for the relevant market newly issued in the 2012 MLR reporting year,
as defined more specifically in the General Instructions, deferred for reporting purposes at the
issuer’s option.
Columns 1 – 5

Individual Market

Include:
Health insurance where the policy is issued to an individual covering the
individual and his or her dependents in the individual market.
Exclude:

Policies reported in other columns.

Column 1- 5

See instructions for these columns, above.

Columns 6 – 10

Small Group Market

Include:

All policies issued in the small group market (including fully insured State and
local government policies).

Exclude:

Policies reported in other columns.

Columns 6 – 10 See instructions for these columns, above.
Columns 11 – 15

Large Group Market

Include:
All policies issued in the large group market (including the Federal Employees
Health Benefit Program and fully insured State and local government policies).
Exclude:

Policies reported in other columns.

Columns 11 –15 See instructions for these columns, above.
Columns 16 – 24

Mini-med Plans

Include:
All policies that have a total annual limit of $250,000 or less for individual,
small group and large group markets, in their respective columns.
11

Exclude:

Policies reported in other columns.

Columns 16 - 24 See instructions for these columns, above.
Columns 25 - 34

Expatriate Plans (Report separately (on the ‘Grand Total’ page) from other
health insurance coverage business. For the 2012MLR reporting year,
expatriate plans should be reported only in the 12/31 column of Parts 1 and 2
(Columns 25 and 30) of the “Grand Total” page of the MLR Form, and all
other expatriate columns(Columns 26 – 29 and 31 – 34) should be left blank.

Include:
All group policies written in the United States that provide coverage for
employees working outside their country of citizenship; working outside of their country of
citizenship and outside the employer’s country of domicile; or non-U.S. citizens working in
their home country. These policies are to be reported on a nationwide, aggregated basis,
separately for the small group and the large group markets, in their respective columns for the
MLR reporting year, as of March 31 of the subsequent year, on the Grand Total page of the
MLR Form.
Exclude:
Column 35

Policies reported in other columns.
Government Program Plans (Excluded by Statute)

Include:
Government sponsored programs that are not subject to section 2718 of the PHS
Act, such as Medicare (Title XVIII, including Medicare Advantage), Medicaid (Title XIX),
State Children’s Health Insurance Program (SCHIP) (Title XXI), and other Federal or State
government-sponsored coverage (other than the Federal Employees Health Benefits Program
or State government sponsored coverage for State employees or retirees).
Report the experience of the issuer’s government program plans for the MLR reporting year as
of December 31, reported to the department of insurance in the issuer’s State of domicile or as
filed on the NAIC SHCE filing for the MLR reporting year.
Column 36

Other Health Business (Not Subject to Section 2718 of the PHS Act)

Information reported here is similar to that reported in the SHCE Part 1 Columns 9 & 10.
Report health plan arrangements that are not group or individual health insurance coverage
provided by a health insurance issuer. Report all other health care business that is not reported
in Columns 1 through 32, including stand-alone dental and vision coverage, long-term care,
disability income, etc.
Include:
Short-term, limited-duration insurance (as defined under 45 C.F.R. §144.103);
supplemental coverage if offered as a separate policy, certificate, or contract of insurance (45
C.F.R §146.145), including Medicare supplemental health insurance (as defined under section
1882(g)(1) of the Social Security Act), coverage supplemental to the coverage provided under
chapter 55 of title 10, United States Code, and similar supplemental coverage provided under a
group health plan; hospital or other fixed indemnity insurance, and specified disease or illness
coverage if offered under a separate policy, certificate, or contract of insurance (45 C.F.R.
§146.145), and other “excepted benefits” as specified by regulations promulgated by HHS (45
C.F.R §146.145). The experience for pharmacy, chiropractic, or mental health coverage,
12

whether sold as a stand-alone product or in conjunction with any other health insurance
coverage, should be reported with the health insurance coverage for the applicable market, as
these are not “excepted benefits” under the PHS Act.
Report the experience of the issuer’s Other Business for the MLR reporting year as of
December 31, as reported to the department of insurance in the issuer’s State of domicile or as
filed on the NAIC SHCE filing for the MLR reporting year.
Column 37

2% Aggregate Rule

Include:
Experience otherwise reportable in Columns 35 – 36, if issuer’s total earned
premium on health insurance coverage and “mini-med” experience (Columns 1, 6, 11, 16, 18,
and 20) for a particular State is less than 2% of its total health earned premium for that State
(Columns 1, 6, 11, 16, 18, 20, 32, and 33). See General Instructions, above.
Column 38

Uninsured (Self-Funded) Plans

Include:
Plans for which a reporting entity, as an administrator, performs administrative
services such as claims processing for an employer that is at risk, and accordingly, the
administrator has not issued an insurance policy.
Report the experience of the issuer’s Uninsured (Self-Funded) Plans for the MLR reporting
year as of December 31, as reported to the department of insurance in the issuer’s State of
domicile or as filed on the NAIC SHCE filing for the MLR reporting year.

13

INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 1,
Summary of Data
The annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012.
In addition to the instructions below, the General Instructions and Column Definitions at the
beginning of these Filing Instructions also apply to this Part 1. The General Instructions and Column
Definitions include instructions regarding reporting of reinsurance, assumed and ceded insurance,
deferred business, individual business through an association, employer business through a group trust
or MEWA, group coverage in multiple states, and dual contract group health coverage.
Please note that the MLR Form and Filing Instructions implement the requirements of 45 CFR Part
158 and are not identical to the definitions or instructions of the NAIC’s SHCE.
Section 1 – Premium
Line 1.1 – Total direct premium earned
Part 2 Lines 1.1 + 1.2 – 1.3 – 1.7 + 1.8 (all columns)
Line 1.2 – Federal high risk pools
Enter subsidies received or (assessments paid) under Federal high risk pools
Line 1.3 – State high risk pools
Enter subsidies received or (assessments paid) under State high risk pools
Exclude: Amounts included in Part 1 Line 2.4.
Line 1.4 – Net assumed less ceded reinsurance premiums earned
The amount to net against the assumed reinsurance premiums earned is: the ceded reinsurance
premiums written; plus the change in unearned premium reserve that is transferred to the
company assuming the risk; plus the change in reserve credit taken other than for unearned
premiums.
Line 1.5 – Other adjustments due to MLR calculations – premiums
Include:
Any amounts excluded from premium for MLR calculation purposes that are
normally included in premiums for financial statement purposes.
Amounts for rate credits paid and the change in reserve for rate credits that were excluded
from Line 1.1 Total Direct Premiums Earned.
Line 1.6 –

Risk revenue

Include: Amounts charged by the reporting entity as a provider or intermediary for specified
medical services (e.g., full professional, dental, radiology, etc.) provided to the policyholders
or members of another issuer or reporting entity.
14

Unlike premiums that are collected from an employer group or individual member, risk
revenue is the prepaid (usually on a capitated basis) payment, made by another insurer or
reporting entity to the reporting issuer in exchange for services to be provided or offered by
such organization.
Section 2 – Claims
Line 2.1 – Total incurred claims
From MLR Form, Part 2 Line 2.16 (all columns)
(Note: In the 2011 MLR reporting form, Part 1 Line 2.1 was equal to Total
adjusted incurred claims, which included Allowable fraud reduction expense. The
2012 MLR reporting form Part 1 Line 2.1 is Total incurred claims, which does not
include Allowable fraud reduction expense. Allowable fraud reduction expense is
accounted for in calculating Adjusted incurred claims in Part 4.)
Line 2.2 – Prescription drugs - (informational only)
Include: Expenses for prescription drugs and other pharmacy benefits covered by
the reporting entity.
Exclude: Prescription drug charges that are included in a hospital billing which
should be classified as Hospital/Medical Benefits.
Line 2.3 – Pharmaceutical rebates - (informational only)
Line 2.4 – State stop loss, market stabilization and claim/census based assessments
(Informational only)
Adjustments that must be included in incurred claims:
 Market stabilization payments or receipts by issuers that are directly tied
to claims incurred and other claims-based or census-based assessments;
 State subsidies based on a stop-loss payment methodology.
Adjustments that must be either included in or deducted from incurred claims:
 Payment to and from unsubsidized State programs designed to address
distribution of health risks across issuers via charges to low risk issuers
that are distributed to high risk issuers must be included in or deducted
from incurred claims, as applicable.
Line 2.5 – Net assumed less ceded claims incurred
Assumed reinsurance claims paid; plus the change in the assumed reinsurance
claims liability and aggregate assumed reinsurance claims reserve; less the ceded
reinsurance claims paid; plus the change in the ceded reinsurance claims liability
and aggregate ceded reinsurance claims reserve; less the change in claims related
reinsurance recoverable.

15

Line 2.6 – Other adjustments due to MLR calculation – claims incurred
Any amounts excluded from claims for MLR calculation purposes that are
normally included in claims for financial statement purposes. For example,
premium deficiency reserves are excluded from contract reserves for MLR
purposes in Part 2; thus, premium deficiency reserves would be included on this
Line. Include the adjustment for multi-option coverage amounts (if offsetting Part
2, Line 2.15 report as a negative amount).
Line 2.7 – Rebates paid
MLR rebates paid during the MLR reporting year.
Line 2.8 – Estimated rebates unpaid at the end of the prior MLR reporting year.
Amount should equal Line 2.9 from the prior year MLR reporting form.
Line 2.9 – Estimated rebates unpaid at the end of the MLR reporting year
MLR rebates estimated but unpaid as of the end of the MLR reporting year.
Line 2.10 – Fee-for-service and co-pay revenue (net of expenses)
Include: Revenue recognized by the issuer for collection of co-payments from
members and revenue derived from health services rendered by reporting entity
providers that are not included in member policies (generally only applicable to
staff-model HMOs).
Deduct:

Medical expenses associated with fee-for-service business.

Section 3 – Federal and State Taxes and Licensing or Regulatory Fees
Line 3.1 – Federal taxes and assessments incurred by the reporting issuer during the MLR
reporting year
3.1a – Federal income taxes deductible from premiums in MLR calculations
Include: All federal income taxes allocated to the respective lines of business
reported.
Exclude:

Federal income taxes on investment income and capital gains.

3.1b – Federal taxes (other than income taxes) and assessments deductible from premium
in MLR calculations:
Include:
Include: All federal taxes and assessments (other than income taxes) allocated to
the respective lines of business reported.
16

Exclude: Fines and penalties of regulatory authorities, and fees for examinations
by any Federal departments other than as specified in 45 CFR §158.161(a) as other
non-claims costs, which are not included as an adjustment to premium revenue.
Line 3.2 – State insurance, premium and other taxes incurred by the reporting issuer during the
MLR reporting year (deductible from premium in MLR calculation).
3.2a – State income, excise, business, and other taxes, allocated to the respective lines
of business reported, that may be excluded from earned premium under 45 CFR
§158.162(b)(1).
Include:
 Any industry wide (or subset) assessments (other than surcharges on specific
claims) paid to the State directly, or premium subsidies that are designed to
cover the costs of providing indigent care or other access to health care
throughout the State, or market stabilization redistributions, or cost transfers for
the purpose of rate subsidies, not directly tied to claims, and that are authorized
by state law.
 Guaranty fund assessments
 Assessments of State industrial boards or other boards for operating expenses or
for benefits to sick employed persons in connection with disability benefit laws
or similar taxes levied by States
 Advertising required by law, regulation or ruling, except advertising associated
with investments
 State income, excise, and business taxes other than premium taxes
3.2b – State premium taxes
Include:
 State premium taxes or State taxes based on policy reserves if in lieu of
premium taxes related to the respective lines of business reported.
3.2c – Community benefit expenditures deductible from premium in MLR calculations
Include: Payments by an issuer for community benefit expenditures (CBE)**
(described below in these Filing Instructions), limited to the highest health
insurance coverage premium tax rate applicable in the State for which the report
is being submitted multiplied by the earned premium allocated to the relevant
State market.
NOTE: The expenditures in lines 3.1a, 3.1b, 3.2a, 3.2b, and 3.2c may not be reported
multiple times or in multiple categories. For example, if an expense is reported in Line
3.2c, the Federal or State assessments may not be included in Lines 3.1a, 3.1b, 3.2a,
3.2b or in the quality improvement expenses reported in Lines 4.1 through 4.6.
**Community benefit expenditures are for activities or programs that seek to achieve the
objectives of improving access to health services, enhancing public health and relief of
government burden. This includes activities that:
17

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Are available broadly to the public and serve low-income consumers;
Reduce geographic, financial or cultural barriers to accessing health services,
and if ceased to exist would result in access problems (e.g., longer wait times or
increased travel distances);
Address federal, state or local public health priorities, such as advancing health
care knowledge through education or research that benefits the public;
Leverage or enhance public health department activities, such as childhood
immunization efforts; or
Otherwise would become the responsibility of government or another taxexempt organization.

Line 3.3 – Regulatory authority licenses and fees incurred by the reporting issuer during the
MLR reporting year.
Include: Statutory assessments to defray operating expenses of any State or
Federal regulatory department, and examination fees in lieu of premium taxes
as specified by State law.
Exclude: Fines and penalties of regulatory authorities, and any fees for
examinations by any State or Federal regulatory departments other than as
specifically included in this Line 3.3.
Section 4 - Health Care Quality Improvement Expenses Incurred
Expenses for Quality Improvement (QI) activities are expenditures for activities conducted by an
issuer that are designed to:
 Improve health quality;
 Increase the likelihood of desired health outcomes in ways that are capable of being
objectively measured and of producing verifiable results and achievements;
 Be directed toward individual enrollees or incurred for the benefit of specified segments of
enrollees or provide health improvements to the population beyond those enrolled in
coverage as long as no additional costs are incurred due to the non-enrollees; and,
 Be grounded in evidence-based medicine, widely accepted best clinical practice, or criteria
issued by recognized professional medical associations, accreditation bodies, government
agencies or other nationally recognized health care quality organizations.
QI activities must be primarily designed to:
 Improve health outcomes including increasing the likelihood of desired outcomes compared
to a baseline and reduce health disparities among specified populations;
 Prevent hospital readmissions through a comprehensive program for hospital discharge;
 Improve patient safety, reduce medical errors and lower infection and mortality rates;
 Implement, promote, and increase wellness and health activities; or
 Enhance the use of health care data to improve quality, transparency, and outcomes and
support meaningful use of health information technology consistent with 45 CFR §158.151.
Expenditures and activities that must not be included in quality improving activities are:
 Those that are designed primarily to control or contain costs;
 The pro rata share of expenses that are for lines of business or products other than those
18

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
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



being reported, including but not limited to, those that are for or benefit self-funded plans;
Those which otherwise meet the definitions for quality improvement activities but which
were paid for with grant money or other funding separate from premium revenue;
Those activities that can be billed or allocated by a provider for care delivery and which are,
therefore, reimbursed as clinical services;
Establishing or maintaining a claims adjudication system, including costs directly related to
upgrades in health information technology that are designed primarily or solely to improve
claims payment capabilities or to meet regulatory requirements for processing claims,
including maintenance of ICD-10 code sets adopted pursuant to the Health Insurance
Portability and Accountability Act (HIPAA), 42 U.S.C. 1320d-2, as amended, and ICD-10
implementation costs in excess of 0.3% of earned premium;
That portion of the activities of health care professional hotlines that does not meet the
definition of activities that improve health quality;
All retrospective and concurrent utilization review;
Fraud prevention activities;
The cost of developing and executing provider contracts and fees associated with
establishing or managing a provider network, including fees paid to a vendor for the same
reason;
Provider credentialing;
Marketing expenses;
Costs associated with calculating and administering individual enrollee or employee
incentives;
That portion of prospective utilization that does not meet the definition of activities that
improve health quality;
Any function or activity not expressly included in Lines 4.1 through 4.6, unless otherwise
approved by and within the discretion of the Secretary, upon adequate showing by the issuer
that the activity’s costs support the definitions and purposes in this Part or otherwise support
monitoring, measuring or reporting health care quality improvement.

Expenses which otherwise meet the definition for QI activities but which were paid for with grant
money or other funding separate from premium revenues shall NOT be included in QI activities
expenses.
Notes:
a.
Healthcare Professional Hotlines: Expenses for healthcare professional hotlines should be
included in Claims Adjustment Expenses to the extent they do not meet the criteria for the above
defined columns of Improve Health Outcomes, Prevent Hospital Readmissions, Improve Patient
Safety, Reduce Medical Errors, and Lower Infection and Mortality Rates, and Implement, Promote,
and Increase Wellness & Health Activities.
b.
Prospective Utilization Review: Expenses for prospective Utilization Review should be
included in Claims Adjustment Expenses to the extent they do not meet the criteria for the above
defined columns of Improve Health Outcomes, Prevent Hospital Readmissions, Improve Patient
Safety, Reduce Medical Errors, and Lower Infection and Mortality Rates, and Implement, Promote,
and Increase Wellness & Health Activities, AND the prospective utilization review activities are not
conducted in accordance with a program that has been accredited by a recognized accreditation body.
Line 4.1 – Improve Health Outcomes
19

Include expenses for the direct interaction of the insurer (including those services delegated by
contract for which the insurer retains ultimate responsibility under the insurance policy),
providers and the enrollee or the enrollee’s representatives (e.g., face-to-face, telephonic, webbased interactions or other means of communication) to improve health outcomes.
This category can include costs for associated activities such as:
 Effective case management, care coordination, and chronic disease management,
including through the use of the medical homes model as defined in section 3606 of
the Affordable Care Act.
 Accreditation fees by a nationally recognized accrediting entity directly related to
quality of care activities included in Lines 4.1 through 4.6;
 Expenses associated with identifying and addressing ethnic, cultural or racial
disparities in effectiveness of identified best clinical practices and evidence based
medicine;
 Quality reporting and documentation of care in non-electronic format.
Line 4.2 – Activities to Prevent Hospital Readmission
Include expenses for implementing activities to prevent hospital readmissions.
This category can include costs for associated activities such as:
 Comprehensive discharge planning (e.g., arranging and managing transitions from
one setting to another, such as hospital discharge to home or to a rehabilitation
center) in order to help assure appropriate care that will, in all likelihood, avoid
readmission to the hospital;
 Personalized post discharge counseling by an appropriate health care professional;
 Any quality reporting and related documentation in non-electronic form for
activities to prevent hospital readmission.
Line 4.3 – Improve patient safety and reduce medical errors
Include expenses for activities primarily designed to improve patient safety, reduce medical
errors, and lower infection and mortality rates.
This category can include costs for associated activities such as:
 The appropriate identification and use of best clinical practices to avoid harm;
 Activities to identify and encourage evidence based medicine in addressing
independently identified and documented clinical errors or safety concerns;
 Activities to lower risk of facility acquired infections;
 Prospective prescription drug utilization review aimed at identifying potential
adverse drug interactions;
 Any quality reporting and related documentation in non-electronic form for
activities that improve patient safety and reduce medical errors.
Line 4.4 – Wellness and health promotion activities
Include expenses for activities primarily designed to implement, promote, and increase
wellness and health activities.
This category can include costs for associated activities such as:
 Wellness assessment;
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Wellness/lifestyle coaching programs designed to achieve specific and measurable
improvements;
Coaching programs designed to educate individuals on clinically effective methods
for dealing with a specific chronic disease or condition;
Public health education campaigns that are performed in conjunction with state or
local health departments;
Actual rewards/incentives/bonuses/reductions in co-pays, etc. (not administration of
these programs) that are not already reflected in premiums or claims should be
allowed as QI activities for the group market to the extent permitted by section
2705 of the PHS Act;
Any quality reporting and related documentation in non-electronic form for
wellness and health promotion activities;
Coaching or education programs and health promotion activities designed to change
member behavior (e.g., smoking, obesity).

Line 4.5 – Health information technology (HIT) expenses related to improving health care
quality
Report information technology expenses associated with the activities in Lines 4.1 through 4.4
for which expenses are reported. (45 CFR §158.151 allows “Health Information Technology”
expenses that are required to accomplish the activities allowed in 45 CFR §158.150.)
Include HIT expenses required to accomplish the activities reported in Lines 4.1 through 4.4
that are designed for use by health plans, health care providers, or enrollees for the electronic
creation, maintenance, access, or exchange of health information as well as activities that are
consistent with Medicare and/or Medicaid meaningful use requirements, and which may in
whole or in part improve quality of care, or provide the technological infrastructure to enhance
current quality improvement or make new quality improvement initiatives possible by doing
one or more of the following:
1. Making incentive payments to health care providers for the adoption of certified electronic
health record technologies and their ‘‘meaningful use’’ as defined by HHS to the extent
such payments are not included in reimbursement for clinical services as defined in 45
CFR §158.140;
2. Implementing systems to track and verify the adoption and meaningful use of certified
electronic health records technologies by health care providers, including those not eligible
for Medicare and Medicaid incentive payments;
3. Providing technical assistance to support adoption and meaningful use of certified
electronic health records technologies;
4. Monitoring, measuring, or reporting clinical effectiveness, including reporting and analysis
of costs related to maintaining accreditation by nationally recognized accrediting
organizations such as NCQA or URAC, or costs for public reporting of quality of care,
including costs specifically required to make accurate determinations of defined measures
(e.g., CAHPS surveys or chart review of HEDIS measures and costs for public reporting
mandated or encouraged by law);
5. Advancing the ability of enrollees, providers, issuers or other systems to communicate
patient centered clinical or medical information rapidly, accurately and efficiently to
determine patient status, avoid harmful drug interactions or direct appropriate care – this
may include electronic health records accessible by enrollees and appropriate providers to
21

monitor and document an individual patient’s medical history and to support care
management;
6. Tracking whether a specific class of medical interventions or a bundle of related services
leads to better patient outcomes;
7. Reformatting, transmitting or reporting data to national or international government-based
health organizations for the purposes of identifying or treating specific conditions or
controlling the spread of disease; or
8. Provision of electronic health records, patient portals, and tools to facilitate patient selfmanagement.
Exclude:
Costs associated with establishing or maintaining a claims adjudication system,
including costs directly related to upgrades in HIT that are designed primarily or solely
to improve claims payment capabilities or to meet regulatory requirements for
processing claims (for example, costs of implementing new administrative
simplification standards and code sets adopted pursuant to the Health Insurance
Portability and Accountability Act (HIPAA), 42 U.S.C. 1320d-2, as amended,
including all expenditures related to ICD-10 which should be reported in Lines 4.6 and
5.8.
Line 4.6 – Allowable ICD-10 Implementation Expenses
Include:
ICD-10 conversion costs incurred in the MLR reporting year up to 0.3% of earned
premium in the relevant State market.
Exclude:
ICD-10 maintenance costs and ICD-10 implementation expenses in excess of 0.3% of
earned premium.
Section 5 – Non-Claims Costs
Line 5.1 – Cost containment expenses not included in quality improvement expenses
Include:
Expenses that serve to actually reduce the number of health services provided or the
cost of such services.
This category can include costs only if they result in reduced costs or services such as:
 Post- and concurrent- claim case management activities associated with
past or ongoing care;
 Pre-Service Utilization review;
 Detection and prevention of payment for fraudulent requests for
reimbursement (including amounts reported in Part 2 Line 2.17a);
 Expenses for internal and external appeals;
 Network access fees to preferred provider organizations and other
network-based health plans (including prescription drug networks) and
22

allocated internal salaries and related costs associated with network
development and/or provider contracting.
Exclude:
Cost-containment expenses that improve the quality of health care and are reported in
Part 1 Section 4.
Line 5.2 – All other claims adjustment expenses:
Include any expenses for administrative services that do not constitute adjustments to
premium revenue, reimbursement for clinical services to enrollees or expenditures on
quality improvement activities or cost containment expenses.
This category can include such costs as:
 Estimating the amount of losses and disbursing loss payments;
 Maintaining records, general clerical and secretarial costs;
 Office maintenance, occupancy costs, utilities and computer maintenance;
 Supervisory and executive duties; and
 Supplies and postage.
Line 5.3 – Direct sales salaries and benefits
Include compensation (including but not limited to salary and benefits) to employees
engaged in soliciting and generating sales to policyholders for the issuer.
Line 5.4 – Agents and brokers fees and commissions
All expenses incurred by the issuer payable to a licensed agent, broker, or producer
who is not an employee of the issuer in relation to the sale and solicitation of policies
for the company.
Line 5.5 – Other taxes
Line 5.5a –Taxes (other than Federal income taxes) and assessments not excluded from
premium under 45 CFR §158.162(a)(2) and (b)(2). (Do not include amounts reported
in Lines 3.1a, 3.1b, 3.2a, or 3.2b.)
Include:
 Taxes (other than Federal income taxes) and assessments not deducted from
Premium in Section 3;
 State sales taxes if the issuer does not exercise the option of including such
taxes with the cost of goods sold and services purchased;
 Any portion of commissions or allowances on reinsurance assumed that
represent specific reimbursement of premium taxes;
 Any portion of commissions or allowances on reinsurance ceded that
represents specific reimbursement of premium taxes;
Line 5.5b – Report fines and penalties of regulatory authorities, and fees for examinations by
any State or Federal departments other than those included in Line 3.3, above.

23

Line 5.6 – Other general and administrative expenses
Include:
General and Administrative Expenses not previously reported in Part 1 sections 3, 4 or
5 above.
These expenses include such examples as:
 salaries,
 outsource services,
 EDP equipment, other equipment,
 accreditation and certification fees,
 reimbursement by uninsured plans and fiscal intermediaries,
 ICD-10 maintenance costs and implementation expenses in excess of 0.3% of
earned premium,
 community benefit expenditures - report only the amount in excess of what is
already reported in Part 1 line 3.2c;
 other additional expenses not included in another category such as rent, legal
fees and expenses, medical examination expenses, inspection reports,
professional consulting fees, travel, advertising, postage, utilities, etc.
Exclude:
-

Any elements already reported on lines 5.1, 5.2, 5.3, 5.4 and 5.5;
Services provided by affiliates under management agreements;
Rating agencies and other similar organizations.

Line 5.7 – Community benefit expenditures (informational only; already included in lines 3.2c
and 5.6)
Line 5.8 – ICD-10 Total Implementation expenses (informational only; already included in
lines 4.6 and 5.6)
Section/Line 6 – Income from fees on uninsured plans
Section 7 - Other indicators or information
Data reported should be allocated to each State and market (e.g., individual, small group, large
group) in the same manner as premium.
Line 7.1 – Number of policies/certificates
This is the number of individual policies (for individual business) or certificates issued
to individuals covered under a group policy in force as of the last day of the reporting
period. It is not the number of persons covered under individual policies or group
certificates. Reasonable approximations are allowed when exact information is not
available to the issuer for group business.
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Line 7.2 – Number of covered lives
This is the total number of lives insured, including dependents, under individual
policies and under group certificates as of the last day of the reporting period.
Reasonable approximations are allowed when exact information is not available to the
issuer.
Line 7.3 – Number of groups
This is the total number of employer groups insured as of the last day of the reporting
period. This is NOT a count of the number of subscribers.
Line 7.4 – Member months
The sum total number of lives insured on a pre-specified day of each month of the
reporting period. Reasonable approximations are allowed when exact information is not
available to the issuer.
Line 7.5 – Number of life-years
Enter the number of member months divided by 12.
This is calculated by using the number entered on Part 1 Line 7.4 / 12
Section 8 – Net investment income and other gain/(loss)
Enter the Grand Total as of 12/31 for ALL markets in columns 1 - 38
Section 9 – Other Federal income taxes
Enter the Grand Total as of 12/31 for ALL markets in columns 1 - 38
Include: Federal income taxes on investment income and capital gains
Exclude: Taxes entered on Part 1 Line 3.1

25

INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 2,
Premium and Claims
The annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012.
In addition to the instructions below, the General Instructions and Column Definitions at the
beginning of these Filing Instructions also apply to this Part 2. The General Instructions and Column
Definitions include instructions regarding reporting of reinsurance, assumed and ceded insurance,
deferred business, individual business through an association, employer business through a group trust
or MEWA, group coverage in multiple states, and dual contract group health coverage.
Please note that the MLR Form and Filing Instructions implement the requirements of 45 CFR Part
158 and are not identical to the definitions or instructions of the NAIC’s SHCE.
Dual Contract Option: If an issuer has a group health plan which provides coverage for in-network
coverage only and an affiliate issuer provides only out-of-network coverage solely for the purpose of
providing a group health plan that offers both in-network and out-of-network benefits, the issuer may
choose to treat the out-of-network experience of the affiliate that provides the out-of-network
coverage as if it were related to the contract providing the in-network coverage. If an issuer chooses
this method of aggregation, it must do so for a minimum of three consecutive reporting years and the
affiliate that provides the out-of-network coverage must not report this experience. After an issuer
applies this method for the initial three consecutive reporting years, the issuer may either continue to
apply this method for any number of additional consecutive reporting years, or may choose to
discontinue applying this method.
Section 1 – Health Premiums Earned
Earned premium means all monies paid by a policyholder or subscriber as a condition of receiving
coverage from the issuer, including any fees or other contributions associated with the health plan and
reported on a direct basis.
Line 1.1 – Direct premium written
12/31 Columns – report amount as of 12/31 of the MLR reporting year, as reported to the
department of insurance in the issuer’s State of domicile or as filed on the NAIC SHCE filing
for the MLR reporting year.
3/31 Columns (Direct premium written for coverage in MLR reporting year only)—report
premium collected through 3/31 of the year following the MLR reporting year for coverage in
the MLR reporting year only, and uncollected (due and unpaid) premium for coverage in the
MLR reporting year only as of 3/31 of the year following the MLR reporting year. Premium
should reflect retroactive eligibility adjustments. However, for the 2012 MLR reporting year
only, issuers may choose to report amounts on the same basis as in the 12/31 columns.

26

Include:
 Premium assumed under a 100% assumption reinsurance agreement (with a novation)
must be reported by the assuming issuer for the entire MLR reporting year during
which the policies are assumed and must not be reported by the ceding issuer;
 Premium assumed under a 100% indemnity reinsurance and administrative agreement,
limited to only those agreements both entered into and also effective prior to March 23,
2010, where the assuming entity is responsible for 100% of the ceding entity’s financial
risk and takes on all of the administration of the block of business.
Exclude:
 Premium ceded under a 100% assumption reinsurance agreement (with a novation)
must be reported by the assuming issuer for the entire MLR reporting year during
which the policies are assumed and must not be reported by the ceding issuer;
 Premium ceded under a 100% indemnity reinsurance and administrative agreement,
limited to only those agreements both entered into and also effective prior to March 23,
2010, where the assuming entity is responsible for 100% of the ceding entity’s financial
risk and takes on all of the administration of the block of business;
 Assessments paid to or subsidies received from State and Federal high risk pools;
 Amounts for rate credits paid.
Line 1.2 - Unearned premium (year preceding the MLR reporting year)
Report reserves established to account for the portion of the premium paid prior to the MLR
reporting year that was intended to provide coverage during the MLR reporting year.
12/31 Columns – report reserves as of 12/31 of the year preceding the MLR reporting
year, as reported to the department of insurance in the issuer’s State of domicile or as
filed on the NAIC SHCE filing for the year preceding the MLR reporting year.
3/31 Columns (Unearned premium for coverage in the MLR reporting year only) – report
premium for coverage in the MLR reporting year only, collected in the immediately
preceding MLR reporting year. Report reserves as of 12/31 of the year preceding the
MLR reporting year. However, if for the 2012 MLR reporting year the issuer chooses to
report written premium on the same basis as in the 12/31 columns, the issuer should
report unearned premium reserves consistently with how it reports written premium.
Line 1.3 - Unearned premium (MLR reporting year)
Report reserves established to account for the portion of the premium paid in the MLR
reporting year that was intended to provide coverage during the following MLR reporting year.
12/31 Columns – report reserves as of 12/31 of the MLR reporting year, as reported to
the department of insurance in the issuer’s State of domicile or as filed on the NAIC
SHCE filing for the MLR reporting year.
3/31 Columns – report zero (note that if collected and due and unpaid premium is
reported correctly in Line 1.1 above, Line 1.1 should not include amounts that would
constitute unearned premium for coverage in years subsequent to the MLR reporting
27

year). However, if for the 2012 MLR reporting year the issuer chooses to report written
premium on the same basis as in the 12/31 columns, the issuer should report unearned
premium reserves consistently with how it reports written premium.

Line 1.4 - Experience rating refunds paid
Experience rating refund is the return of a portion of premium pursuant to a retrospectively
rated funding arrangement when the sum of incurred losses, retention and margin are less than
earned premium. Include State premium refunds paid during the MLR reporting year, but
exclude Federal and State MLR rebates.
1.4a - 12/31 Columns - report all refunds paid through 12/31 of the MLR reporting year.
1.4b - 3/31 Columns - report refunds associated only with claims incurred during the MLR
reporting year and paid through 3/31 of the following year.
Line 1.5 – Reserves for experience rating refunds (rate credits) (MLR reporting year)
12/31 Columns – based on all refunds unpaid as of 12/31 of the MLR reporting year.
3/31 Columns – based on refunds associated only with claims incurred in the MLR reporting
year and unpaid through 3/31 of the following year.
Include:
Reserves for experience rating refunds, plus reserves for State premium refunds.
Exclude:

Reserves for Federal and State MLR rebates.

Deduct: Amounts receivable under retrospectively rated funding arrangements.
Line 1.6 – Reserves for experience rating refunds (rate credits) (year preceding the MLR reporting
year)
12/31 Columns – as of 12/31 of the year preceding the MLR reporting year.
Include:
Reserves for experience rating refunds, plus reserves for State premium refunds.
Calculate reserves as of December 31 of the year preceding the MLR reporting year.
Exclude:

Reserves for Federal and State MLR rebates.

Deduct:

Amounts receivable under retrospectively rated funding arrangements.

Line 1.7 – Premium write-offs
Include: Agents’ or premium balances determined to be uncollectible and written off as
losses; recoveries made during the MLR reporting year on balances previously written;
28

Include actual write-offs.
Exclude: Reserves for bad debt or statutory non-admitted amounts.
Report amounts as of 12/31 of the MLR reporting year.
Line 1.8 – Group conversion charges
If the amount entered on Line 1.1 has been reduced or increased by the amount of any
conversion charges associated with group conversion privileges between Group and
Individual lines of business in your annual statement accounting, enter the reverse of
these charges on this line in the appropriate columns.
If an issuer transfers portions of earned premium associated with group conversion
privileges between group and individual lines of business in its Annual Statement, these
amounts must be added to or subtracted from incurred claims. (See Part 2, Section 2 –
Claims.)
Line 1.9 – Premium ceded under 100% reinsurance (informational only; excluded from Line 1.1)
Include:
 Premium ceded under a 100% assumption reinsurance agreement (with a novation).
 Premium ceded under a 100% indemnity reinsurance and administrative agreement,
limited to only those agreements both entered into and also effective prior to March
23, 2010, where the assuming entity is responsible for 100% of the ceding entity’s
financial risk and takes on all of the administration of the block of business.
Line 1.10 – Premium assumed under 100% reinsurance agreement (informational only; also included
in Line 1.1)
Include:
 Premium assumed under a 100% assumption reinsurance agreement (with a
novation).
 Premium assumed under a 100% indemnity reinsurance and administrative
agreement, limited to only those agreements both entered into and also effective prior
to March 23, 2010, where the assuming entity is responsible for 100% of the ceding
entity’s financial risk and takes on all of the administration of the block of business.
Section 2 - Claims
Amounts reported in Section 2 must include direct claims paid to or received by physicians and other
non-physician clinical providers, including under capitation contracts with those providers, whose
services are covered by the policy for clinical services or supplies covered by the policy. Nonphysician clinical providers must be licensed, accredited, or certified to perform clinical health
services, consistent with State law, and engaged in the delivery of medical services to enrollees.
Reimbursement for clinical services to enrollees is also referred to as incurred claims.
Line 2.1 – Claims paid
29

2.1a – 12/31 Column – Claims paid during the MLR reporting year regardless of incurred date.
2.1b – 3/31 Column - Claims incurred only during the MLR reporting year, paid through 3/31
of the following year.
Report payments net of risk share amount collected.
Include:
 Claims incurred during the MLR reporting year that were either paid during the MLR
reporting year or paid through March 31 of the year following the MLR reporting year;
 Any overpayment that has not yet been recovered should be included in paid claims
and included in health care receivables;
 Market stabilization payments or receipts by issuers that are directly tied to claims
incurred and other claims based or census based assessments;
 State subsidies based on a stop-loss payment methodology;
 Claims assumed under a 100% assumption reinsurance agreement (with a novation)
must be reported by the assuming issuer for the entire MLR reporting year during
which the policies are assumed and must not be reported by the ceding issuer;
 Claims assumed under a 100% indemnity reinsurance and administrative agreement,
limited to only those agreements both entered into an effective prior to March 23, 2010,
where the assuming entity is responsible for 100% of the ceding entity’s financial risk
and takes on all of the administration of the block of business;
 Payment to unsubsidized State programs designed to address distribution of health risks
across issuers via charges to low risk issuers that are distributed to high risk issuers
must be included in incurred claims
Exclude:
 Claims ceded under a 100% assumption reinsurance agreement (with a novation) must
be reported by the assuming issuer for the entire MLR reporting year during which the
policies are assumed and must not be reported by the ceding issuer;
 Claims ceded under a 100% indemnity reinsurance and administrative agreement,
limited to only those agreements both entered into an effective prior to March 23, 2010,
where the assuming entity is responsible for 100% of the ceding entity’s financial risk
and takes on all of the administration of the block of business;
 Amounts paid to third party vendors for secondary network savings;
 Amounts paid to third party vendors for network development, administrative fees and
profit, claims processing, and concurrent or post-service utilization management or any
other issuer function;
 Amounts paid, including amounts paid to a provider, for professional or administrative
services that do not represent compensation or reimbursement for covered services
provided to an enrollee;
 Incentive and bonus payment made to providers (to be reported in Line 2.11).
Deduct:
 Any overpayment that has already been received from providers should not be reported
as a paid claim;
 Prescription drug rebates, refunds, incentive payments, bonuses, discounts charge
30



backs, coupons, grants, direct or indirect subsidies, direct or indirect remuneration,
upfront payments, goods in kinds or similar benefits received by the issuer;
Payment from unsubsidized State programs designed to address distribution of health
risks across issuers via charges to low risk issuers that are distributed to high risk
issuers must be deducted from incurred claims.

Line 2.2 – Direct claim liability (MLR reporting year)
2.2a - 12/31 Column – liability based on all claims regardless of incurred date and unpaid
as of 12/31 of the MLR reporting year
2.2b - 3/31 Column – liability based on claims incurred during the MLR reporting year
and unpaid as of 3/31 of the following year for those claims incurred during
the MLR reporting year
For the 3/31 Column, calculate as of March 31 of the year following the MLR reporting
year, based on claim payments made through March 31 of that year and report in the
appropriate column.
Report the outstanding liabilities for healthcare services related to claims in the process of
adjustment, incurred but not reported and amounts withheld from paid claims and capitation
payments.
Include:
 Unpaid claims, including claims reported in the process of adjustment, percentage
withholds from payments made to contracted providers, recoverable for anticipated
coordination of benefits (COB) and subrogation (including third party liability).
 Incurred but not reported - Report the claims incurred only during the MLR reporting
year and not reported by 3/31 of the following year. Except where inapplicable, the
reserve included in these lines should be based on past experience, modified to reflect
current conditions, such as changes in exposure.
Line 2.3 – Direct claim liability prior year (year preceding the MLR reporting year)
12/31 Column – Amount reported to your state of domicile in the manner in which required, as
of 12/31 of the year preceding the MLR reporting year.
Line 2.4 – Direct claim reserves (MLR reporting year)
2.4a - 12/31 Column – reserves based on experience regardless of the incurred date calculated
as of 12/31 of the MLR reporting year
2.4b - 3/31 Column – reserves based on experience incurred only in the MLR reporting year
calculated as of 3/31 of the following year for those claims incurred during the
MLR reporting year
For the 3/31 Column, calculate as of March 31 of the year following the MLR reporting year,
based on claim payments made through March 31 of that year related to claims incurred for the
MLR reporting year.
31

Report reserves related to healthcare services for present value of amounts not yet due on
claims.
Line 2.5 – Direct claim reserves prior year (year preceding the MLR reporting year)
12/31 Column – Amount reported to your state of domicile in the manner in which required, as
of 12/31 of the year preceding the MLR reporting year.
Line 2.6 – Direct contract reserve (MLR reporting year)
Report the amount of reserves required when, due to the gross premium structure, the future
benefits exceed the future net premium. Contract reserves are in addition to claim liabilities
and claim reserves.
Include:

Contract reserves and other claims related reserves.
Calculate as of December 31 of the MLR reporting year.

Exclude:

Premium deficiency reserves.
Reserves for expected MLR rebates

2.6a - 12/31 Column –reserves as of 12/31 of the MLR reporting year, as reported to the
department of insurance in the issuer’s State of domicile or as reported on the
SHCE filed with the NAIC for the MLR reporting year.
2.6b - 3/31 Column – For policies issued prior to 2011, contract reserves may only be used in
the MLR calculation if such reserves were held prior to 2011, and may include
reserves used for the purpose of leveling policy duration-based variation in claims
experience only if durational contract reserves were held for such policies prior to
2011. Reported contract reserves may not exceed contract reserves calculated
using the applicable product pricing assumptions. Calculate as of 12/31 of the
MLR reporting year.
Line 2.7 – Direct contract reserves prior year (year preceding the MLR reporting year)
See instructions for line 2.6.
12/31 Column – Amount reported as of 12/31 of the year preceding the MLR reporting year.
Calculate reserves as of December 31 of the year preceding the MLR reporting
year.
Line 2.8 – Experience rating refunds (rate credits) paid
Experience rating refund is the return of a portion of premium pursuant to a retrospectively
rated funding arrangement when the sum of incurred losses, retention and margin are less than
earned premium. Include State premium refunds paid during the MLR reporting year, but
exclude Federal and State MLR rebates.
2.8a

12/31 Column – report all refunds paid through 12/31 of the MLR reporting year
32

2.8b
3/31 Column – report refunds associated only with claims incurred during the MLR
reporting year and paid through 3/31 of the following year.
Line 2.9 – Reserve for Experience rating refunds (rate credits) (MLR reporting year)
2.9a - 12/31 Column – based on all refunds unpaid as of 12/31 of the MLR reporting year
2.9b - 3/31 Column – based on refunds associated only with claims incurred during the MLR
reporting year and unpaid as of 3/31 of the following year.
Include:

Reserves for experience rating refunds, plus reserves for State premium refunds.

Exclude:

Reserves for Federal and State MLR rebates.

Deduct:

Amounts receivable under retrospectively rated funding arrangements.

Line 2.10 – Reserve for experience rating refunds (rate credits) prior year (year preceding the
MLR reporting year)
12/31 Column – Amount reported as of 12/31 of the year preceding the MLR reporting year.
Include:
Reserves for experience rating refunds, plus reserves for State premium refunds.
Calculate reserves as of December 31 of the year preceding the MLR reporting year
Exclude:

Reserves for Federal and State MLR rebates.

Deduct:

Amounts receivable under retrospectively rated funding arrangements.

Line 2.11 – Incurred medical incentive pools and bonuses
12/31 Column – based on all payments through 12/31 of the MLR reporting year
3/31 Column – payments based on amounts incurred during the MLR reporting year and paid
through 3/31 of the following year for the amounts incurred during the MLR reporting
year
Include arrangements with providers and other risk sharing arrangements whereby the
reporting entity agrees to either share savings or make incentive payments to providers.
2.11a – Paid medical incentive pools and bonuses for the MLR reporting year
2.11b – Accrued medical incentive pools and bonuses for the MLR reporting year.
Exclude amounts recorded on line 2.11a, include only the amount of medical incentive
and bonus pool payments that are estimated to be owed but not yet paid for the MLR
reporting year.
2.11c – Accrued medical incentive pools and bonuses for the year preceding the MLR
reporting year.
33

Line 2.12 – Net healthcare receivables
12/31 Column – receivables reported as of 12/31 of the MLR reporting year
3/31 Column – receivables incurred during the MLR reporting year and that remain
outstanding as of 3/31 of the following year
2.12a – Healthcare receivables (MLR reporting year)
2.12b – Healthcare receivables (prior reporting year)
Calculate as of December 31 of the year preceding the MLR reporting year.
The amounts on these lines are the gross healthcare receivable assets, not just the admitted
portion. These amounts should not include those healthcare receivables, such as loans or
advances to non-related party hospitals, established as prepaid assets that are not expensed
until the related claims have been received from the provider.
Line 2.13 – Contingent benefit and lawsuit reserves for claims incurred in the MLR reporting year.
12/31 Column – reserves reported as of 12/31 of the MLR reporting year
If not separately reported in annual financial filings to the issuer’s regulatory
department, the issuer does not need to separately report this element in this column.
3/31 Column – reserves incurred during the MLR reporting year and unpaid as of 3/31 of the
following year;
Issuer must separately report this data element in the 3/31 column as provided in 45
CFR Part 158 and as noted within the instructions.
Include:

The claims-related portion of reserves for contingent benefits and lawsuits.

Exclude:

Reserves related to costs associated with claims lawsuits within Line 2.13; i.e.
legal fees, court costs, pain and suffering damages, punitive damages, etc.

Line 2.14 – Group conversion charges
If there are any group conversion charges for a health plan, the conversion charges must be
subtracted from the incurred claims for the aggregation that includes the conversion policies
and this same amount must be added to the incurred claims for the aggregation that provides
coverage that is intended to be replaced by the conversion policies.
If an issuer transfers portions of earned premium associated with group conversion privileges
between group and individual lines of business in its annual statement accounting, these
amounts must be added to or subtracted from incurred claims.
Line 2.15 – Blended rate adjustment
Affiliated issuers that offer group coverage at a blended rate may choose whether to make an
34

adjustment to each affiliate’s incurred claims and activities to improve health care quality, to
reflect the experience of the issuer with respect to the employer as a whole, according to an
objective formula the issuer defined prior to the beginning of the MLR reporting year, so as to
result in each affiliate having the same ratio of incurred claims to earned premium for that
employer group for the MLR reporting year as the ratio of incurred claims to earned premium
calculated for the employer group in the aggregate. From the date an issuer chooses to use
such an adjustment, it must be used for a minimum of three consecutive MLR reporting years.
Affiliated issuers that choose to make such an adjustment must do so for all policies with
blended rates in the applicable State market.
Line 2.16 Total incurred claims
12/31 column: Part 2 Lines 2.1a + 2.2a – 2.3 + 2.4a – 2.5 + 2.6a – 2.7 + 2.8a + 2.9a – 2.10 +
2.11a + 2.11b – 2.11c – 2.12a + 2.12b + 2.13 + 2.14 + 2.15)
3/31 column: Part 2 Lines 2.1b + 2.2b + 2.4b + 2.6b – 2.7 + 2.8b + 2.9b + 2.11a + 2.11b –
2.12a + 2.13 + 2.14 + 2.15)
(Note: Allowable fraud recovery expenses are added to Incurred Claims in the calculation of
Adjusted Incurred Claims in Part 4 Line 1.2)
Line 2.17 – Allowable fraud reduction recovery expenses
Report the amount of claims payments recovered through fraud reduction efforts not to exceed
the amount of fraud reduction expenses.
This amount is limited to the lesser of the total fraud reduction expenses reported on Line
2.17a and actual fraud recoveries collected on paid claims on Line 2.17b.
Line 2.17a – Total fraud reduction expense
Line 2.17b – Total Fraud Recoveries that Reduced PAID claims in Part 2 Line 2.1.
Include collected fraud recoveries on paid claims only.

35

INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 3, Expense
Allocation Methodology
These annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012. Complete Part 3 only within the Grand Total page of the MLR report.
Description of Methods to Allocate Expenses
A single (not State-by-State) Part 3 of the Grand Total MLR Form must be submitted by the issuer to
describe the methods used to allocate expenses, as reported on the MLR Form, including incurred
claims, quality improvement expenses, Federal and State taxes and licensing or regulatory fees, and
other non-claims costs, to each health insurance market (e.g., individual, small group, large group,
mini-med plans, expatriate plans, government program plans, other health business, and uninsured
plans, each as defined in the Column Definitions which follow the General Instructions at the
beginning of these Filing Instructions) in each State.
A detailed description of each expense element must be provided, including how each specific
expense meets the criteria for the type of expense in which it is categorized, as well as the method by
which it was aggregated. (See instructions within Part 1 and Part 2 for descriptions of the various
expense elements requested in Part 3 of the MLR Form.)
For a new initiative that otherwise meets the definition of quality improvement activities (QI) (see
Filing Instructions for MLR Form, Part 1) but has not yet met the requirement that it be capable of
being objectively measured and of producing verifiable results and achievements, note that it is
“NEW” in the description of the QI and include the expected timeframe for the activity to meet this
requirement.
Acceptable Bases for Allocation of Expenses
Allocation of each type of expense among health insurance markets should be based on a generally
accepted accounting method that is expected to yield the most accurate results. If this is not feasible,
the issuer should provide an explanation as to why it believes a more accurate result will be gained
from its allocation of expenses, including pertinent factors or ratios, such as studies of employee
activities, salary ratios or similar analyses.
Many entities operate within a group where personnel and facilities are shared. Shared expenses,
including expenses under the terms of a management or administrative services contract, must be
apportioned pro rata to the entities incurring the expense.
Any basis adopted to apportion expenses must be that which is expected to yield the most accurate
results and may result from special studies of employee activities, salary ratios, premium ratios or
similar analyses. Expenses that relate to a specific entity or sub-set of entities, such as personnel costs
associated with the adjusting and paying of claims, must be borne solely by that specific entity or
subset of entities and must not be apportioned to other entities within a group.
Line References
Line 1 – Incurred Claims (as reported on the MLR Form, Part 1, Line 2.1 and Part 2, Lines 2.1
36

through 2.15)
Line 2 – Federal and State Taxes and Licensing or Regulatory Fees
Line 2.a – Federal taxes and assessments
(as reported on the MLR Form, Part 1, Lines 3.1a and 3.1b).
Line 2.b – State insurance, premium and other taxes
(as reported on the MLR Form, Part 1, Lines 3.2a and 3.2b)
Line 2.c – Community benefit expenditures (as reported on the MLR Form, Part 1, Line 3.2c)
Line 2.d – Regulatory authority licenses and fees (as reported on the MLR Form, Part 1, Line
3.3)
Line 3 – Quality Improvement Expenses (as reported on the MLR Form Part 1 Section 4)
Line 3.a – Improve health outcomes (as reported on the MLR Form Part 1 Line 4.1)
Line 3.b – Activities to prevent hospital readmission
(as reported on the MLR Form Part 1 Line 4.2)
Line 3.c – Improve patient safety and reduce medical errors
(as reported on the MLR Form Part 1 Line 4.3)
Line 3.d – Wellness and health promotion activities
(as reported on the MLR Form Part 1 Line 4.4)
Line 3.e – Allowable ICD-10 expenses not to exceed 0.3 % of premium
(as reported on the MLR Form Part 1 Line 4.5)
Line 3.f – Health Information Technology (HIT) expenses related to health improvement
(as reported on the MLR Form Part 1 Line 4.6)
Line 4 – Non-claims Costs (as reported on the MLR Form, Part 1, Lines 5.1 through 5.8)
Line 4.a – Cost containment expenses (as reported on the MLR Form Part 1 Line 5.1)
Line 4.b – All other claims adjustment expenses (as reported on the MLR Form Part 1 Line
5.2)
Line 4.c – Direct sales salaries and benefits (as reported on the MLR Form Part 1 Line 5.3)
Line 4.d – Agents and brokers fees and commissions (as reported on the MLR Form Part 1
Line 5.4)
Line 4.e – Other taxes (as reported on the MLR Form Part 1 Line 5.5a and 5.5b)
Line 4.f – Other general and administrative expenses (as reported on the MLR Form Part 1
Line 5.6)
Line 4.g – Community benefit expenditures (as reported on the MLR Form Part 1 Line 5.7)
Line 4.h – ICD-10 Implementation (as reported on the MLR Form Part 1 Line 5.8)

37

INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 4, MLR
and Rebate Calculation
The annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012.
No data needs to be entered in any of the shaded cells.
COLUMN DEFINITIONS – PART 4
Prior years’ MLR reporting information is to be reported as initially submitted to the Secretary in the
MLR filing of the respective reporting year.
Columns 1, 5, 9, 13, 17, 21, 25 & 29 – PY2 (Not applicable to the 2012 MLR reporting year)
Beginning in the 2013 MLR reporting year, report the information for the MLR reporting year
that is 2 years prior to the MLR reporting year.
Columns 2, 6, 10, 14, 18 and 22 – PY1
(Note: Columns 26 and 30 are labeled for expatriate experience, but for the 2012 MLR
reporting year should be left blank.)
Beginning in the 2012 MLR reporting year, report the information for the MLR reporting year
that is 1 year prior to the MLR reporting year.
In the 2012 MLR reporting year only, if the issuer’s experience is fully credible (as defined
below in Part 4 Section 3), do not report the information for the 2011 MLR reporting year.
Columns 3, 7, 11, 15, 19 and 23 – CY
(Note: Columns 27 and 31 are labeled for expatriate experience, but for the 2012 MLR
reporting year should be left blank.)
Report the information for the MLR reporting year.
Columns 4, 8, 12, 16, 20 and 24 – Total
(Note: Columns 28 and 32 are labeled for expatriate experience, but for the 2012 MLR
reporting year should be left blank.)
For the 2012 MLR reporting year, for issuers with fewer than 75,000 life years in the
applicable State market in 2012, the information for PY1 and CY for each market (e.g.,
individual market, small group market, etc.) should be added together for the Total (e.g. the
issuer will aggregate two years of data). For issuers with 2012 life years greater than or equal
to 75,000, the Total column will equal the CY column. The amount in the Total column will be
used to calculate the issuer’s MLR and rebates owing, if any.
38

Column Groupings
For the definitions for each of the following markets, see the Column Definitions, which immediately
follow the Instructions in the Filing Instructions for the MLR Form.
Columns 1 – 4
Columns 5 - 8
Columns 9 - 12
Columns 13 - 16
Columns 17 - 20
Columns 21 - 24
Columns 25 – 28

– Individual Market
– Small Group Market
– Large Group Market
– Mini-med plans – Individual Market
– Mini-med plans – Small Group Market
– Mini-med plans – Large Group Market
– Expatriate plans – Small Group Market (Grand Total filing only. For the
2012 MLR reporting year, expatriate plans should not be reported in Part 4 of the
MLR Form.)
Columns 29 - 32 – Expatriate plans – Large Group Market (Grand Total filing only. For the
2012 MLR reporting year, expatriate plans should not be reported in Part 4 of the
MLR Form.)

LINE INSTRUCTIONS – PART 4
Section 1- Medical Loss Ratio Numerator
(Not applicable to the Grand Total Page)
Line 1.1 – Adjusted incurred claims as reported on the MLR Form for prior year(s)
PY2 - (not applicable for 2012)
PY1 - 2011 MLR Form, Part 1, Line 2.1, Columns 3/31 + Deferred PY– Deferred CY
Line 1.2 – Adjusted incurred claims as of 3/31 of the year following the MLR reporting year.
PY2 - (not applicable for 2012)
PY1 - enter the amount of adjusted incurred claims reported on Part 1, Line 2.1,
Columns 3/31 + Deferred PY1 – Deferred CY of the MLR form for the prior MLR
reporting year, restated as of 3/31 of the year following the MLR reporting year, if the
issuer is aggregating two years of data. (This is also knows as incurred claims based
upon claims incurred in 12 months and paid in 27 months). Restate all applicable
elements of adjusted incurred claims, including reserves and the allowable fraud
reduction expense.
CY- enter the result of the following calculation:
Column CY: Part 1 Line 2.1 + Part 2 Line 2.17, Columns 3/31 + Deferred PY1
– Deferred CY (note that adjusted incurred claims in the Deferred PY1 columns
on Parts 1 and 2 should have been restated as of 3/31 of the year following the
MLR reporting year)

39

Line 1.3 – Improving Health Care Quality Expenses Incurred
PY2 - (not applicable for 2012)
PY1 - 2011 MLR Form, Part 1, Line 4.6, Columns 3/31 + Deferred PY1 – Deferred CY
CY - enter the result of the following calculation:
Part 1, Lines 4.1 + 4.2 + 4.3 + 4.4 + 4.5 + 4.6, Columns 3/31 + Deferred PY1 –
Deferred CY
Line 1.4 – MLR rebates paid based on experience for the two immediately preceding MLR
reporting years
PY2: - (not applicable for 2012)
PY1: -issuers with fewer than 75,000 life-years in the applicable State market in 2012
may enter the amount of the Federal MLR rebates paid for the 2011 reporting year.
Line 1.5 – MLR numerator
Enter the results of the following calculation:
Part 4, Total column, Lines 1.2 + 1.3 + 1.4
Issuers with health insurance coverage in both the Massachusetts individual and small group
markets who choose to merge their markets in accordance with Massachusetts law, should
combine Part 4, Lines 1.2 + 1.3 + 1.4 for both markets, and enter this combined amount on
Part 4 Line 1.5 in the Total Columns for both markets (Columns 4 and 8). Please note that
MLR numerator and denominator are the only fields on the MLR Form where experience for
the two markets should be combined.
Line 1.6 – Mini-med /expatriate numerator after adjustment factor
For the 2012 MLR reporting year, expatriate columns should be left blank in
Part 4.
For the 2012 MLR reporting year, the adjustment factor is 1.75 for mini-med
plans.
Enter the results of the following calculations:
Mini-Med: 1.75 x (Part 4, Total column, Lines 1.2 + 1.3 + 1.4)
(Note: Mini-Med issuers who are aggregating data should add the reported experience
for each MLR year together and then apply the multiplier for the 2012 MLR reporting
year (1.75) to the aggregated experience.)

40

Section 2 - Medical Loss Ratio Denominator
(Not applicable to the Grand Total page)
Line 2.1 – Premium earned including federal and state high risk programs:
PY2 - (not applicable for 2012)
PY1 - 2011 MLR Form, Part 1, Line 1.4, Columns 3/31 + Deferred PY1 – Deferred CY
CY - enter the result of the following calculation:
Part 1, Lines 1.1 + 1.2 + 1.3, Columns 3/31 + Deferred PY1 – Deferred CY
Line 2.2 – Federal and State taxes and licensing or regulatory fees
PY2 - (not applicable for 2012)
PY1 - 2011 MLR Form, Part 1, Line 3.4, Columns 3/31 + Deferred PY1 – Deferred CY
CY - enter the result of the following calculation:
Part 1, Lines 3.1a + 3.1b + 3.2a + (the higher of 3.2b or 3.2c) + 3.3, Columns
3/31 + Deferred PY1 – Deferred CY
Line 2.3 – MLR denominator
Enter the result of the following calculation:
Part 4, Lines 2.1 – 2.2
Issuers with health insurance coverage in both Massachusetts’ individual and small
group markets who choose to merge their markets in accordance with Massachusetts
law, should combine Part 4, Lines 2.1 – 2.2 for both markets, and enter this combined
amount on Part 4 Line 2.3 in the Total Columns for both markets (Columns 4 and 8).
Please note that MLR numerator and denominator are the only fields on the MLR Form
where experience for the two markets may be combined.
Section 3 - Credibility Adjustment
(Not applicable to the Grand Totals page)
Line 3.1 – Life years to determine credibility
PY2 - (not applicable for 2012)
PY1 - 2011 MLR Form, Part 1, Line 11.5, Columns 3/31 + Deferred PY1 – Deferred
CY
CY - Part 1, Line 7.5, Columns 3/31 + Deferred PY1 – Deferred CY
Non-credible experience:
Less than 1,000 life-years as reported in the Total
Column for the relevant market. The issuer is presumed to meet or exceed the applicable
MLR standard and does not receive a credibility adjustment.
41

Partially credible experience: At least 1,000 but fewer than 75,000 life-years as
reported in the Total Column for the relevant market. Except as noted in the instructions
for Line 3.5 below, the issuer receives a credibility adjustment which is calculated using
the data reported in Lines 3.1 through 3.4 of this Part 4.
Fully credible experience:
75,000 or more life-years as reported in the Total Column
for the relevant market. The issuer does not receive a credibility adjustment.
Line 3.2 – Base credibility factor
The base credibility factor for partially credible experience is determined based on the
number of life-years included in the aggregation and the factors shown below.
When the number of life-years used to determine credibility exactly matches a life-year
category listed in Table 1 (found below and in the Tables tab of the MLR Form), the
value associated with that number of life-years is the base credibility factor. The base
credibility factor for a number of life-years between the values shown in Table 1 is
determined by linear interpolation. DO NOT ROUND.
Table 1
Life Years
< 1,000
1,000
2,500
5,000
10,000
25,000
50,000
>= 75,000

Base credibility factor
No Credibility
8.3%
5.2%
3.7%
2.6%
1.6%
1.2%
0.0% (Full Credibility)

Enter the amount calculated using linear interpolation and the values shown in Table 1.
Issuers with non-credible or fully credible experience do not have a base credibility
factor, and should enter zero.
Line 3.3 – Average deductible
The per person deductible for a policy that covers a subscriber and the subscriber’s
dependents shall be calculated as follows:
The lesser of the deductible applicable to each of the individual family members or the
overall family deductible for the subscriber and subscriber’s family divided by two
(regardless of the total number of individuals covered through the subscriber).
Issuers who choose to use a deductible factor of 1.0 may leave this field blank.
Issuers with non-credible or fully credible experience do not need to report an average
deductible.
42

Issuers offering products with differing deductibles should use a weighted average based
upon life years for each deductible level of policies included in the aggregation.
Issuers with between 0 and 75,000 life years in the applicable State market in 2012
should first calculate an average deductible using life years and per-person deductible
levels for policies in force in 2012. Issuers should then determine a two-year average
deductible based on the weighted average of the average deductible for the 2011 MLR
reporting year and the average deductible for the 2012 MLR reporting year.
Enter the average deductible calculated based on the explanation above.
Line 3.4 – Deductible factor
This amount is calculated based upon the average deductible reported in the Total
Column for Line 3.3. The deductible factor ranges from 1.0 to 1.736 and is shown in
Table 2 below and in the Tables tab of the MLR Form. When the average deductible used
to determine the deductible factor exactly matches a deductible level listed in Table 2, the
deductible factor associated with that average deductible level is the factor in Table 2.
The deductible factor for a deductible level between the values shown in Table 2 is
determined by linear interpolation (do not round).
Health plan deductible
< $2,500
$2,500
$5,000
>= $10,000

Deductible Factor
1.000
1.164
1.402
1.736

Enter the amount from the table corresponding with the average deductible. Issuers with
non-credible or fully credible experience do not have a deductible factor and can enter a
value of 1.0.
Line 3.5 – Credibility adjustment
Enter the result of the following calculation:
Part 4, Lines 3.2 x 3.4 (DO NOT ROUND)
Issuers with non-credible or fully credible experience do not receive a credibility
adjustment and should enter zero.
Section 4 - Medical Loss Ratio Calculation
(Not applicable to the Grand Total page)
Issuers with non-credible experience should leave Lines 4.1 – 4.3 blank.
Line 4.1 – Preliminary Medical Loss Ratio
4.1a – Preliminary MLR
Enter the result of the following calculation:
43

Part 4, Lines 1.5 / 2.3 DO NOT ROUND
4.1b – Preliminary MLR: Mini-Med / Expatriate
(For the 2012 MLR reporting year expatriate columns should be left blank in Part 4.)
For mini-med, enter the result of the following calculation:
Part 4, Lines 1.6 / 2.3 DO NOT ROUND
Line 4.2 – Credibility adjustment
Enter the value from:
Part 4, Line 3.5
Line 4.3 – MLR including credibility adjustment (if applicable)
Enter the result of the following calculation:
Part 4, Lines 4.1a or 4.1b + 4.2 (round to three decimal places, e.g. 0.801 or
80.1%)
Section 5 - MLR Rebate Calculation
(For Current Year only)
Issuers with non-credible experience should leave Lines 5.1 – 5.3 blank and enter zero on Line
5.4.
Line 5.1 – Enter the applicable MLR Standard as noted below: (Not applicable to the Grand
Total page)
The applicable MLR standard is based on one of the following:
 The statutory MLR standard for the relevant market (i.e., 80% for the individual market
and small group market; and 85% for the large group market); or
 The HHS-approved adjusted MLR standard for a particular State’s individual market;
or
 The State MLR standard, if the State requires a higher percentage than the statutory
MLR standard for the relevant market for rebate purposes.
 If an issuer thinks a state’s higher MLR standard does not apply to its MLR and rebate
requirements under federal law, please contact CCIIO at [email protected].
Line 5.2 – Credibility-adjusted MLR (not applicable to the Grand Total page)
Enter the value from:
Part 4, Line 4.3
Line 5.3 – Adjusted earned premium, less Federal and State taxes and licensing or regulatory
fees (not applicable to the Grand Total page)
Enter the value from:
Part 4, Lines 2.1 – 2.2, Column CY only
Line 5.4 – Rebate amount if credibility-adjusted MLR is less than the MLR standard
44

(not applicable to the Grand Total page)
Enter the result of the following calculation:
Part 4, (Lines 5.1 – 5.2) x Line 5.3
Issuers with non-credible experience and issuers whose credibility-adjusted MLR is equal
to or above the MLR standard should enter zero.


On the Grand Total page, enter the sum of MLR rebates owed by the company for
each State and market (individual, small group, large group, mini-med individual,
mini-med small group, mini-med large group) in the respective Total Columns. For
the 2012 MLR reporting year expatriate columns should be left blank in Part 4.

45

INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 5, Rebate
Disbursement
These annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012.
The Column Definitions, which immediately follow the General Instructions at the beginning of these
Filing Instructions, apply to the markets to be reported in Columns 1 through 8 of Part 5.
Column 1
Column 2
Column 3
Column 4
Column 5
Column 6
Column 7

–
–
–
–
–
–
–

Column 8

–

Individual Market
Small Group Market
Large Group Market
Mini-med plans – Individual Market
Mini-med plans – Small Group Market
Mini-med plans – Large Group Market
Expatriate plans – Small Group Market (For the 2012 MLR reporting year,
expatriate plans should not report anything on Part 5 of the MLR Form.
Expatriate plans – Large Group Market (For the 2012 MLR reporting year,
expatriate plans should not report anything on Part 5 of the MLR Form.)

Additional definitions:


Policyholder means any entity that has entered into a contract with an issuer to receive health
insurance coverage.



Subscriber refers to both the group market and the individual market. In the group market,
subscriber means the individual, generally the employee, whose eligibility is the basis for the
enrollment in the group health plan and who is responsible for the payment of premiums. In the
individual market, subscriber means the individual who purchases an individual policy and who is
responsible for the payment of premiums.

Section/Line 1 – Number of policies/certificates
Enter amount from Part 1, Line 7.1
Section 2 - Number of policyholders/subscribers owed rebates
Line 2.a – Number of group policyholders who are being paid a rebate
Include: All group policies within the respective group markets that are due a rebate
and to whom the issuer is paying the rebate directly. This is a count of the groups, not a
count of the subscribers in the groups.
Exclude: Rebates being paid in the individual market and rebates in group markets
which the issuer is paying directly to the group’s subscribers rather than to the group
policyholder.
Line 2.b – Number of subscribers being paid a rebate.
46

Include: All subscribers under individual policies that are due a rebate;
All subscribers under small group and large group policies that are due a rebate and to
whom the issuer is paying the rebate directly to the subscribers rather than to the group
policyholder.
Line 2c – Number of group policyholders whose calculated rebate is de minimis.
De Minimis –
 For a group policy for which the issuer distributes the rebate directly to the
policyholder, if the total rebate owed to the policyholder and its subscribers
combined is less than $20 for the MLR reporting year.
Line 2.d – Number of subscribers whose calculated rebate is de minimis.
Include the number of subscribers in the individual market and the number of
subscribers of policyholders in the group markets whose calculated rebate is de
minimis.
De Minimis –
 For a group policy for which the issuer distributes the rebate to the policyholder, if
the total rebate owed to the policyholder and its subscribers combined is less than
$20 for a given MLR reporting year.
 For a group policy for which the issuer distributes the rebate directly to the
subscribers, if the total rebate owed to each subscriber is less than $5 for a given
MLR reporting year.
 For an individual policy, if the total rebate owed to each subscriber is less than $5
for a given MLR reporting year.
Section 3 – Total amount of rebates
Line 3.a – Total amount of rebates (from Part 4, Line 5.4)
Aggregate the amounts reported on Line 3.a in every state, and report the
aggregated amount on the Grand Total page of the MLR Form.
Line 3.b – Total amount of de minimis rebates
Report the total amount of rebates that are de minimis, as described above in the
instructions for Part 5 Section 2.
Line 3.c – Amount of rebates being paid by premium credit
Line 3.d – Amount of rebates being paid by lump-sum reimbursement
Section 4 – Prior MLR reporting year rebates
Line 4.a – Amount of rebates paid based on the prior MLR reporting year.
Line 4.b – Percentage of rebate notices timely sent to individual policy subscribers or
group policyholders owed a rebate.
47

Enter the percentage of notices sent by August 1 following the prior MLR
reporting year.
Line 4.c – Percentage of notices timely sent to subscribers of group policies owed a
rebate.
Enter the percentage of notices sent by August 1 following the prior MLR
reporting year.
Line 4.d – Percentage of rebates timely paid to individual policy subscribers and group
policyholders owed a rebate.
Include:
 Rebates paid as a lump-sum check or reimbursement to individual policy
subscribers and directly to group policyholders (e.g., if this form is being filed
for the 2012 MLR reporting year, include rebates for the 2011 MLR reporting
year that were disbursed as a lump sum by August 1, 2012);
 Rebates credited to individual policy subscribers and directly to group
policyholders for the premium due on or after August 1 following the prior
MLR reporting year (e.g., if this form is being filed for the 2012 MLR reporting
year, enter the percentage of rebates based upon the 2011 MLR reporting year
that were paid as premium credit beginning August 1, 2012).
Exclude: Rebates in group markets which the issuer paid directly to the group’s
subscribers rather than to the group policyholder.
Line 4.e – Percentage of rebates timely paid directly to subscribers of group policies
owed a rebate.
Enter the percentage of rebates paid by August 1 following the prior MLR
reporting year, for rebates which the issuer paid directly to the group’s
subscribers rather than to the group policyholder.
Line 4.f – Amount of unclaimed rebates from the prior MLR reporting year.
Report the amount of rebates owed based on the previous MLR reporting year
which remain unpaid because the issuer was unable, after making a good faith
effort, to locate a former policyholder or subscriber.
Line 4.g – Describe the methods used to locate policyholders/subscribers to distribute
the prior MLR reporting year’s unclaimed rebates.
Line 4.h – Disbursement method of the prior MLR reporting year’s unclaimed rebates
Describe the method used to disburse the prior MLR reporting year’s unclaimed
rebates.

48

INSTRUCTIONS FOR MLR ANNUAL REPORTING FORM - PART 6,
Additional Responses
These annual MLR Form Filing Instructions only apply to the 2012 MLR reporting year and its
reporting requirements. These Filing Instructions will be revised to reflect changes that apply to the
filing years subsequent to 2012.
Line 1 – If the issuer reported amounts in Part 1, Line 3.2c, Community Benefit Expenditures, provide
the state premium tax rate that was used in determining the reported amount.
Line 2 - If the issuer reported amounts in Part 2, Line 2.15, Blended rate adjustment, provide the
affiliate(s)’ name(s) for which blended rate adjustments were made.
Line 3 - If the issuer reported amounts in the 3/31 Columns related to dual contract options with
affiliates providing out-of-network coverage, provide the affiliate(s)’ name(s) for which experience is
being reported.
Line 4 - If the issuer entered into any 100% assumption reinsurance agreements (with a novation)
during the MLR reporting year provide the name(s) of the entity(ies) with which the agreement was
(were) made and the effective date of the novation. Report only those agreements that are applicable
to “health insurance coverage” as defined on page 2 of the instructions.
Line 5 – If the issuer novated any business in the MLR reporting year, and that novation was effective
during the MLR reporting year, provide the name(s) of the entity(ies) to which the business was sold
and the date of the sale or transfer.
Line 6 – If the issuer has any 100% indemnity reinsurance and administrative agreements effective
prior to March 23, 2010, for which the assuming entity is responsible for 100 percent of the ceding
entity's financial risk and takes on all of the administration of the block of business, provide name(s)
of the entity(ies) that is (are) reporting the experience related to such business. Report only those
agreements that are applicable to “health insurance coverage” as defined on page 2 of the instructions.

49