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HHS Issues Medical Payout Rule

The U.S. Department of Health and Human Services (HHS) on Monday issued its regulations on medical payouts required under the health care law, a standard known as the medical loss ratio (MLR). The MLR goes into effect in January 2011 and insurers now writing their plans for next year have been asking for guidance from HHS as soon as possible. The law (PL 111-148, PL 111-152) requires that large group plans spend 85 percent of premiums on clinical services and activities related to quality of care. Only 15 percent can go to other items, such as administrative costs, advertising and profits. For small group and individual plans, it's 80 percent premiums and 20 percent other costs. If insurers fall short of the standards in 2011 they'll have to issue rebates for that amount in 2012.

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