State RegulationsNY specificDifficulty 2/5
A health insurer selling coverage in New York spends too little of its premium dollars on medical care and quality improvement to satisfy the Affordable Care Act's medical loss ratio standard. What must the insurer do?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under the Affordable Care Act, an insurer that fails to meet the medical loss ratio standard for its line of business must rebate the excess premium to its policyholders, returning the value it failed to spend on care or quality improvement. The remedy is a direct payment back to consumers, not a closure of business or a transfer to any fund, and it operates separately from the federal tax credits that subsidize enrollees' premiums.
Why the other options are wrong
- A) The remedy is not to close or reissue blocks; the shortfall goes back to policyholders as rebates.
- B) No state insurance fund receives the money; MLR rebates go to the policyholders themselves.
- D) Premium tax credits are federal subsidies calculated from income and the benchmark premium, not adjusted for an insurer's MLR shortfall.
Memory hook
Miss the MLR mark, mail the money back to policyholders.