U.S. Department of Health and Human Services  
 Office of Inspector General 
 
Data Brief  
 August  2021, OEI-03-20-00230  
Nationwide,  Almost  All  Medicaid  Managed  Care Plans  Achieved  Their 
Medical  Loss  Ratio  Targets  
Why OIG  Did This Review 
Key  Results   Managed care has replaced fee-for-service as the predominant 
  In  the  34  States  that  required  payment model in Medicaid.  State and Federal  spending on 
minimums  for  medical  loss  ratios   Medicaid managed care is growing  and totaled  $360  billion in  
(MLRs),  91  percent  of Medicaid  2020, accounting for more than  half  of  total  Medicaid spending  
managed care plans  met  the  that year.   Federal requirements for medical loss ratios  (MLRs)  
State-set  minimum MLR.   An  MLR   were established  to ensure that plans  spend  most of their 
is  the  percentage of revenue that  
revenue on health care  services and quality improvements, 
a  plan  spends  on  health  care 
thereby limiting  the amount  that plans can spend on 
services  and  quality 
administration and keep as profit.   These requirements also  
improvements.  
enhance fiscal stewardship of  Medicaid expenditures by helping  
  Nineteen plans  reported owing a  to  ensure  that States have sufficient  information to oversee 
total  of  $198  million to  States  that  
spending by their Medicaid  managed care plans.  
chose  to  require  plans  to  return 
money if  minimum MLRs  were   Federal regulations give  States the option  to establish a minimum 
not  met.   For  all  but  one  plan,  the   MLR of at  least 85  percent for their Medicaid managed care 
owed amount  covered a  
plans.  Regardless of whether a  State establishes a minimum 
12-month reporting  period.   
MLR, it must use plan-reported MLR  data to set  future payment 
  Regardless  of  whether  States  set  rates for managed care  so that  its  plans will reasonably achieve  
minimum MLRs,  92  percent  of  all  an MLR of at least 85  percent.  
plans  achieved  MLRs  that  met  or  
exceeded the  Federal  MLR   This data brief provides stakeholders with national data on (1)  the 
standard of  85  percent.   MLRs of Medicaid managed care plans  and (2)  the extent to 
which plans met State-set minimum MLRs  and the Federal  MLR 
standard of  85  percent.    
How OIG Did This Review  
We requested that  Medicaid agencies  from  the 50 States and the District  of  Columbia  (which we refer 
to collectively as States)  complete an online survey and submit information about their managed care 
plans that are subject to Federal MLR requirements.  We also  requested that States provide the annual  
MLR reports that they received from their Medicaid managed  care plans.  All 51  States  responded  to 
our information request,  and 43 States had plans that  were  subject to Federal MLR requirements  as of 
September 1, 2020.  States submitted annual MLR reports for reporting periods ending in 2017,  2018, or 
2019.  We analyzed  States  survey responses  and annual MLR reports for 513 plans to identify States 
MLR requirements and the extent to which plans had met State-set minimum MLRs and the Federal 
85-percent standard.    
    What OIG Found  
Although Federal MLR regulations do not require States to set minimum MLRs, 34 States had 
established minimum MLRs for 434 Medicaid  managed care plans for annual reporting  periods ending  
in 2017, 2018, or 2019.  Ninety-one percent of  plans met these State-set  minimum MLRs.  However, 
39  plans failed to meet their State-set minimum MLRs for the period reviewed.   Nineteen  of these plans 
reported owing  a total  of  $198  million to States that  had  opted to require their plans to return money 
to the State  when minimum MLRs were not met.   For all but one plan, the owed amount  covered  
a  12-month  MLR reporting  period.  Finally, 92  percent of Medicaid managed care plans  (471 of 513) 
achieved MLRs that met  or exceeded the Federal  85-percent MLR  standard  regardless of  whether their 
States had established minimum MLR requirements.   This data brief shows that nationwide,  almost all 
managed care plans met or exceeded MLR requirements to direct funds toward patient care and quality 
improvements.  Further, it demonstrates that States that  chose to establish minimum MLRs  with  
requirements  to return monies  may recoup millions of  Medicaid  dollars  from  plans that failed to  meet  
the State-set minimum MLR thresholds.  
   
BACKGROUND  
 
 
 
Managed care has replaced fee-for-service as the predominant payment model in 
Medicaid.   State and Federal  expenditures  on Medicaid managed care are  growing  
and totaled  $360  billion  in 2020, which was 55  percent of  total Medicaid  expenditures 
in that year.1   Federal  requirements for MLRs  in  Medicaid managed care were 
established to  help ensure the  appropriate  use of Federal and State dollars for health 
care  services and  for  quality improvements for Medicaid enrollees.2   This data brief  
provides stakeholders with national  data on (1)  the MLRs of  Medicaid managed care 
plans  and (2) the extent  to which plans have met State-set  minimum  MLRs  and the 
Federal  MLR standard of 85  percent.  
Medicaid  Managed  Care  
Medicaid  is a complex landscape of State-specific programs that  offer  health 
coverage to  eligible groups, such as low-income families, pregnant women, children, 
and individuals with disabilities.  States administer and finance Medicaid  using State 
and Federal  funds.  States have the flexibility to structure their programs on the basis 
of  their unique needs  and  Federal  regulations.   For Medicaid  managed care, States 
contract with and oversee the health plans that  operate in the State.  States pay these 
contracted managed care plans a monthly premium, known  as a capitation  payment, 
for each enrollee  regardless of whether the enrollee uses any covered services each 
month.  Federal MLR requirements were established to ensure that Medicaid  
managed care plans spend  most of  these payments on enrollees covered services 
and quality improvements, thereby limiting the amount that  plans  can spend  on 
administration  and  keep  as  profit.  
Exhibit 1: Formula for  
Medicaid  Managed  Care MLRs  
Medical Loss Ratio  
Medicaid managed care plans, including  
Numerator  
managed care  organizations  (MCOs), 
Incurred claims plus 
prepaid ambulatory health plans  (PAHPs),  expenses for health care 
and prepaid inpatient health plans  (PIHPs)  quality improvement   
are subject to Federal  MLR requirements.3   
The Federal  MLR is the percentage of 
Denominator  
revenue that a managed  care plan spent 
Premium  revenue   
on  health care  services and quality  
minus taxes, licensing  
improvements,  as specified in regulation,   fees, and regulatory fees  
and  calculated using a standard  formula, as  
shown in Exhibit 1.4   
 
 
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Background  | 2   Medicaid MLR  requirements  
To comply with Federal MLR regulations, States had to  include  requirements for MLR  
reporting  in their Medicaid managed  care plan contracts beginning  on or  after  
July  1,  2017.5   Specifically, States must require managed care plans to use their 
revenue and  expenditure figures for the MLR reporting year  to calculate  MLRs, and  
require plans to  submit  an annual MLR report to  the State within 12 months after the 
end of the MLR reporting year.6, 7   A plans annual MLR report must include specific 
data elements such as the calculated  MLR, premium  revenue,  and  (if applicable)  any 
remittance amounts owed to the State.8   A plan  must attest to  the accuracy of the 
MLR calculation when  the plan submits its  annual MLR report  to the State.9   States  are  
required, for contracts  starting  on or  after  July 1, 2019,  to set their managed care 
plans capitation  rates so that plans will reasonably achieve MLRs of at  least  
85  percent.10   As part of  the  process for  setting capitation rates, States must take into 
account  the MLR data that their managed care plans have reported.11   
Optional  minimum MLR and remittance policies  
Federal regulations give States the option  to choose whether to require minimum 
MLRs for their Medicaid managed care plans, as shown in Exhibit 2.  If a  State opts to 
set a minimum MLR, it  must be at least 85 percent.12   States that set minimum MLRs 
also have the option to require that their managed care plans pay remittances to the 
State if  a plan fails to meet the minimum  MLR.13   States determine their own 
methodology for calculating  the remittance amounts that plans owe.   For example,  a 
plan could owe the State a portion of its revenue equal to the percentage  by which  
the plan missed a State-set minimum MLR.   In this  example, if a plan  achieved an  MLR  
that was 5 percent  below  the State-set minimum, the plan may owe the State a 
remittance amount equal to 5  percent of  its revenue.    
  Exhibit 2:  Federal MLR Requirements and Optional MLR Policies  
States must require  Medicaid managed care plans to:  
 
Calculate  MLRs  using  revenue   Submit an  annual MLR report 
 
and expenditure figures.  Plans  to the State within 12  months of  
must attest to the accuracy of  the end of the reporting year.  
 
these MLR calculations.   The report must include the MLR, 
  premium revenue, any 
remittance owed, and other data.  
 
States  may  choose  to require Medicaid managed care plans to:  
 
Meet a minimum MLR  of at   Pay remittances if they fail to 
least 85 percent.  States can set a   meet the State-set minimum 
 
minimum MLR above 85  percent.   MLR.  
 
 
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Background  | 3   Related  OIG  Work  
From 2015 to 2017, OIG  issued a series of seven State-specific audits that estimated  
potential  Medicaid savings if  the State had implemented a minimum MLR  
requirement.14   These audits occurred  before  the Centers for Medicare &  Medicaid  
Services (CMSs)  MLR requirements were incorporated into  the Medicaid regulations.  
The audits used a hypothetical Medicaid MLR calculation based on a formula similar 
to the Federal  MLR standard for certain private insurers and Medicare Advantage 
plans.  These audits found that five States could  have realized savings if they had  
required an 85-percent  minimum MLR and collected remittances from managed care 
plans if the minimum MLR  was not  met.  
Methodology  
We requested that States provide to  OIG one annual MLR report for each Medicaid  
managed care plan subject to Federal  MLR requirements.  All 51 States (including the 
District of  Columbia) responded to our request for information.15   We received  annual  
MLR reports from the 43 States that  had contracts with Medicaid managed care plans 
that were subject to Federal MLR requirements as of  September 1, 2020.  16, 17    
To provide a national landscape of Medicaid managed care MLRs, we included in our 
review  all  annual MLR reports submitted by  States, except those  that were only for the 
Childrens  Health Insurance Program (CHIP).   States submitted annual MLR reports for 
reporting periods ending in 2017, 2018, or 2019.  For each annual MLR report  
included in our review, we analyzed  the MLR, remittance,  and  revenue data  contained  
in the report.18    
States submitted annual  MLR  reports that incuded  plans  aggregated  plan-level MLR  
and/or  separate MLRs  for  specific Medicaid populations (e.g., children in foster care)  
or geographic areas (e.g., county, region).19   When an annual MLR report contained  
population-level MLRs or geographic-level  MLRs and also contained an aggregated  
plan-level  MLR, we analyzed the plan-level MLR.   When an annual MLR report  
contained  population-level MLRs or geographic-level  MLRs  and did not contain  an  
aggregated plan-level MLR, we analyzed  each of  these MLRs separately.  In our 
results, we use the terms managed care plans and plans to mean a single MLR for 
an entire plan, a specific Medicaid  population, or a geographic area.   See the Detailed  
Methodology section for more information.  
 
 
 
 
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Background  | 4    
RESULTS  
 
Most  States  established  minimum  MLR  requirements  for 
Medicaid  managed  care plans,  even though  Federal regulations 
do  not  require States  to  do  so  
Federal MLR regulations give States the option to set minimum MLRs of at least  
85  percent for their managed care plans.  Of the 43 States that had Medicaid  
managed care plans subject to Federal  MLR regulations, 34 chose to adopt minimum 
MLR requirements, as shown in Exhibit 3.  These State-set minimum MLRs covered  
434 of the 513 plans in  our review.   Only nine States  did not  establish minimum MLRs 
for any plans.    
Exhibit 3:   Most States had  established minimum MLR requirements  for the managed  
care plans in our review.  
ME 
AK 
b 
VT  NH 
WA  MT  ND  MN  WI  MI  NY  MA  RI 
ID  WY  SD  IA  IL  IN  OH  PA  NJ  CT 
a  State-Set  
OR  NV  CO  NE  MO  KY  WV  VA  MD  DE 
Minimum MLR 
b  b 
CA  UT  NM  KS  AR  TN  NC  SC  DC  At least 85% 
No minimum 
AZ  OK  LA  MS  AL  GA 
No plans subject  
HI  TX  FL  to Federal MLR  
regulations 
Source:  OIG analysis  of plan-level information collected from State Medicaid agencies.  
Note: This exhibit reflects the State-set minimum  MLR for plans subject to Federal  MLR regulations for annual  MLR reporting  periods  
ending  in 2017, 2018, or 2019.    
a Oregon set minimum MLRs for all but one  plan in  our review.    
b  Arkansas, New  Hampshire, and  Utah reported  that they did set minimum  MLRs as  of September 2020.   
 
Of  the 33  States that chose  to adopt minimum MLR  requirements  for all of their plans,  
25 set the minimum MLR at 85 percent, 1 set it at 86 percent, 1 set it at 88 percent, 
and 1  set it at 90  percent.   In addition, 5  of the 33  States set  minimum MLRs  for all of 
their plans, but the minimum MLRs  varied  by plan.  These  minimum MLRs varied  
between 85  percent  and 90  percent depending on the plans performance on quality 
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Results  | 5   metrics, population served, type of service delivered, or plan type.20   An additional  
State  set a  minimum MLR  of 85  percent for all but one plan.  This plan was not  
required to meet a minimum MLR.    
Three of the nine States that had not set any minimum MLRs during the period we 
reviewed  did  require minimum MLRs  as of  September 2020.  This raises the number 
of States  that require  minimum MLRs to 37  of 43  States.   An additional State  is  
planning to  set a minimum MLR in future plan contracts.  
The remaining  five  States reported that they had  not  established  minimum MLR 
requirements  for their plans.  Two  of  these States said  that the reason  they do not set 
minimum MLRs  is that  they  set plans capitation  rates so that plans achieve target 
MLRs.   Another  State  said  that it has  a profit-sharing mechanism built into plans  
contracts.  The fourth State  said  that  it  did not need a minimum MLR because plans 
have historically exhibited stable MLRs.   The last of these States  said  that  it  is not  in 
the States best interest to pursue a minimum MLR.  
Almost  all Medicaid  managed  care plans  met  their State-set 
minimum  MLRs  
Ninety-one  percent of plans that were required to meet minimum MLRs (395  of 434) 
met the minimum MLRs established  
by their States, as shown in  Exhibit 4: Most Medicaid managed care 
Exhibit  4.  Among the 434  plans  plans met State-set minimum MLRs.   
required to meet minimum MLRs, 
326 had to  meet a State-set  
minimum MLR  of 85  percent  and  91%  Met the Minimum MLR 
395 plans across  34 States 
the remaining 108  had to meet 
Median MLR: 93% 
State-set minimum MLRs between 
86  percent and 90  percent.   
9%  Missed the Minimum MLR 
The 39  plans that failed to meet  39 plans across  14 States 
State-set minimum MLR   Median MLR: 81% 
requirements were spread across 
14  States.  For these 39 plans,  
Source: OIG  analysis of Medicaid managed care plans  annual  
22  did not  meet  an  85-percent  MLR reports and  plan-level information  collected from State 
Medicaid  agencies.  
minimum MLR  and  17  did not  meet  
minimum MLRs  set above 85 percent.   
Overall, a greater percentage of plans did not meet  the higher minimum  MLRs  set by 
States.  Of  all plans subject to an 85-percent State-set minimum MLR, 7  percent (22  of 
326  plans) did not meet  it.   Of  all plans subject to higher State-set minimum MLRs, 
16  percent (17 of 108  plans) did not  meet them.   
For the 39  plans that failed to meet their State-set minimum MLR  requirements, the 
difference between the plans MLRs and the State-set minimum MLRs ranged from 
0.06  percentage points  to 32 percentage points.  The majority of  these plans missed  
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Results  | 6   their State-set minimum MLRs by at  least 5  percentage points, as shown in Exhibit  5.  
Four of these plans missed their State-set minimum MLRs by at least 10  percentage  
points.     
  Exhibit 5: Of plans that missed their State-set minimum MLRs, the majority  
missed  by at least 5 percentage points.   
Number of Plans 
3  14  18  4 
Missed by  Missed by  1 to   Missed by  5 to   Missed by at  
less than  1 point  4.99 points  9.9 points  least 10 points 
Source: OIG  analysis of Medicaid managed care plans  annual  MLR reports  and  plan-level information collected from  
State Medicaid  agencies.  
Nineteen  Medicaid  managed  care plans  that  failed  to  meet  their 
State-set  minimum  MLRs  reported  owing  a  total  of  $198  million 
to  States  
Federal regulations allow States to require  payments  from plans that fail to meet  
State-established minimum MLRs.  For the annual  MLR reports that we reviewed, 
19  of the  39  plans that missed their minimum MLRs reported  owing millions of dollars  
in remittances back to States  and  the Federal government.  These 19  plans reported  
owing  a total of $198  million to  6  States, with the amounts owed ranging  from  
$1.8  million  to $40.2  million per plan.21   For all but  1  of the 19 plans, the owed 
amounts  covered a 12-month MLR  reporting period.  The  remaining  plan provided an 
MLR for a 17-month reporting period.  
Not all  States require their managed  care plans to pay remittances when plans fail to  
meet State-set minimum MLRs.  Of the 37  States that had established minimum MLR  
requirements as of  September 2020, 28  had also  established remittance requirements  
for all of their plans.  Another four  States required remittances for some of their plans.  
For example, one State exempted behavioral health plans but required remittances for 
all  other plans.   In contrast, 5 of  the 37 States had not adopted remittance 
requirements for any plans as of  September 2020, despite requiring minimum MLRs.  
These States reported that they take actions other than requiring remittance 
payments, including changing plans future capitation  rates on the basis of the  MLRs  
the plans achieved,  or using other types of fiscal  management strategies,  such as  risk  
corridors and  profit-sharing.22   One  State  said that it had established  MLR remittance  
requirements in plans contracts starting October  2020.  
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Results  | 7   Nationwide,  92  percent  of  plans  achieved  the Federal 
85-percent MLR  standard,  regardless  of  whether  States  set 
minimum  MLR  requirements  
Nearly all  plans met or exceeded the Federal 85-percent MLR standard regardless of  
whether their States  had  established minimum MLRs, as shown in Exhibit  6.  For  
managed care contracts starting on or after July 1, 2019, Federal regulations require 
States to set capitation  rates so that  Medicaid managed care plans will reasonably 
achieve an MLR of at  least 85 percent.  Ninety-two percent of plans (471  of 513) 
achieved MLRs equal to  or greater than 85 percent, with a median MLR  of 93 percent  
across all plans.   
MLRs ranged from 55.8  percent to 144.7  percent, including 42  plans with MLRs below  
85  percent.  Most  plans (409) achieved MLRs between 85  percent and 99.9  percent, 
and 62  plans had MLRs of 100  percent and above.  When a plans MLR  is below  
85  percent, the plan failed to meet  the spending targets for health care services and  
quality improvements.   When a plans MLR  is above  the State-set minimum MLR or 
the Federal  standard, the plan exceeded spending targets  for  health care  services and 
quality improvements  and  may  keep less of its revenue as profit.  
Exhibit 6: Regardless of whether States set minimum MLR requirements, most 
Medicaid managed care plans achieved MLRs that met or exceeded the 
Federal standard of  85 percent.  
Source: OIG  analysis of Medicaid managed care plans  annual  MLR  reports and plan-level information collected from  
State Medicaid  agencies.  
 
Of the 42  plans that did  not meet the 85-percent MLR standard, only 6  were from 
States that did not establish minimum MLR requirements for any of their plans.  
Although these six plans were not required to meet any State-set minimum MLRs or  
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Results  | 8   pay remittances to their  States, four of these plans annual MLR reports included the 
amounts they would have owed if the States had required an 85-percent minimum 
MLR.  These four  plans would have collectively owed $139  million to three States if  
requirements for minimum MLRs and remittances  had been in effect.  
Compared to larger plans,  smaller  plans more frequently 
reported  MLRs that were either lower or much higher than 
85  percent  
Just over 100 plans reported MLRs of less than 85  percent or equal to  or greater than 
100  percent.  These plans tended to  be smaller plans, as determined by the plans  
revenue amounts (Exhibit 7).  These  104  plans reported an average revenue  of  
$250  million.  In contrast, the 409  plans with MLRs between 85 and 99.9  percent  
reported an average revenue of $670  million.  Smaller plans are expected to  
experience more variation  in their MLRs when compared to larger plans because the 
expected  cost for medical issues is more difficult to predict for smaller plans.   In a  
July  2017 Informational  Bulletin, CMS specifically noted that a smaller managed care 
plans reported MLR is more likely to  vary, and vary more widely, around a targeted 
standard, due to the disproportionate effect random variations can have on smaller 
managed care plans.23    
Exhibit 7: Plans that reported MLRs on the lower and higher ends of the 
  range tended to be smaller.a  
8% 
  19% 
39%  24%  Revenue 
s 14%  At least $500M 
  n
a
Pl
f  $200-$499M 
o
  ge  33%  24%  27%  $100-$199M 
a
t
n
ce Below  $100M 
r
  Pe 16% 
40% 
33% 
21% 
 
 
MLR below  85%  MLR of  85-99.9%  MLR at least 100% 
  (42 plans) b (409 plans)  (62 plans) b 
Source: OIG analysis of  Medicaid managed care plans  annual  MLR reports.  
a  
  In this analysis,  we used  plan revenue as a  proxy for plan  size.   For plans that  had MLR reporting periods that were  
shorter or longer than  12 months, we calculated a  12-month revenue based on each  plans average  monthly  
revenue.  
 
b  
Because of rounding, the total  percentage does  not equal 100.  
  
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Results  | 9    
CONCLUSION  
 
 
Federal MLR requirements help ensure the use of Federal and State Medicaid dollars 
for  health care  services and quality improvements  for Medicaid enrollees.  States must  
set their capitation  rates so that their Medicaid managed care plans will reasonably 
achieve an MLR of at  least 85  percent.24   Nationwide, nearly  all  Medicaid managed 
care plans achieved MLRs that met  this Federal  standard.  These plans spent at least  
85  percent of their revenue on the direct provision of  health care  and on activities 
that improve the quality of care, while  devoting 15  percent  or less of their revenue to  
administration and  profit.    
States are leveraging  minimum MLRs to help ensure  the  appropriateness of  their 
Medicaid managed care spending.  Most  States chose to require all or  some  of  their 
managed care plans to  meet a minimum MLR of 85  percent, with  some States setting  
the minimum MLR at a  higher bar than 85  percent.  In turn, most  plans nationwide  
achieved MLRs that met  or exceeded their State-set minimums or the Federal  
85-percent standard.  However,  36  plans  missed  both the State and Federal  targets,  
6  plans  missed only the Federal standard, and  3 plans  missed only their State-set  
minimum MLRs.   States that opt to establish  minimum  MLRs with  remittance 
requirements have the potential to recoup millions of Medicaid dollars  when plans fail 
to meet State-set minimum MLRs.  In fact, in 6 States that required remittances, 
19  plans reported  owing  $198  million  to  their States  and the Federal government.  
This data brief shows that nationwide,  almost all  managed care plans met or 
exceeded MLR requirements to direct funds toward patient care and quality 
improvements.  Further, it demonstrates that States that choose to  require  minimum 
MLRs  with  remittance requirements may recoup millions of dollars from plans that fail  
to meet  State-set minimum MLRs.  In a separate forthcoming report, OIG will  
(1)  evaluate States oversight of  their Medicaid managed care  plans compliance with 
MLR reporting requirements  and (2)  assess the completeness of  MLR data that plans 
have reported to the States.  
Data Brief: Nationwide, Almost All Medicaid Managed Care  Plans Achieved their Medical Loss Ratio Targets  
OEI-03-20-00230   Conclusion  | 10    
DETAILED  METHODOLOGY  
 
 
Data Sources  
Self-administered survey.   We requested that all  State Medicaid agencies respond  
to an online survey regarding implementation of the Federal  MLR requirements as of  
September  1,  2020.  The survey included questions about whether the State 
established minimum MLR and remittance requirements for its Medicaid managed  
care plans.  For States that had not established requirements for minimum MLRs and 
remittances, we asked  why they had not done so.  
Information request.   We requested that States provide information, including the 
State-set  minimum MLR  (if applicable), for each  managed care plan they contracted  
with as of September  1,  2020.   
Plans annual MLR reports.   We requested that States provide to OIG the  annual  
MLR report(s)  for each Medicaid managed care plan subject to  Federal  MLR  
requirements.  All 51 States (including the District of  Columbia) responded to our 
request for information.25   We received  annual MLR reports from the 43  States that 
had contracts with Medicaid  managed care plans that were subject to Federal MLR  
requirements as of  September  1,  2020.26, 27   States submitted annual MLR reports for 
the following types of plans:  managed care organization  (MCO)  plans;  prepaid  
inpatient health plans;  prepaid ambulatory health plans;  MCOs plus managed 
long-term services and  supports  plans (MLTSS); MLTSS-only  plans; 
Medicare-Medicaid plans;  behavioral health plans;  and dental plans.  
States submitted annual  MLR reports for reporting periods ending  in 2017, 2018, or 
2019, as shown in Exhibit  8.  Almost all  plans annual MLR reports  (94 percent or 
484  plans) reflected MLR reporting  periods of 12  months.   However, States also 
provided annual MLR reports that reflected MLR  reporting periods that were shorter 
than 12  months (23 plans) or longer  than 12 months  (6  plans).   We did  not exclude 
any annual MLR reports from the analysis on the basis of  the  length of the MLR  
reporting period.  
  
Exhibit 8: MLR reporting  periods  included in  this review  
Year MLR reporting period ended   Number  of plans  
2017   19  
2018   301  
2019   193  
Total   513  
  Source: OIG  analysis of Medicaid managed care plans  annual  MLR  reports.  
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans  
Achieved their  Medical Loss Ratio Targets, OEI-03-20-00230                                                                  Detailed Methodology  | 11   We did not request from States information about CHIP.  However, when States 
provided annual MLR reports that contained combined MLR data for Medicaid and  
CHIP, we included these data in our analysis.  Some annual MLR reports were for 
plans that served recipients eligible for both Medicare and Medicaid and  did not  
contain separate, Medicaid-only figures for the MLR calculations.  We included these 
data in our analysis.   However,  remittance amounts for the combined  
Medicare-Medicaid plans were based only on the  Medicaid  portion.    
States submitted annual  MLR reports where plans reported an aggregated plan-level 
MLR and/or separate MLRs for specific Medicaid  populations (e.g., children in foster 
care) or geographic areas (e.g., county, region).28   When an annual MLR report  
contained population-level MLRs or geographic-level MLRs and also contained an 
aggregated plan-level  MLR, we analyzed the plan-level  MLR.  When an annual MLR  
report contained population-level MLRs or geographic-level MLRs and did  not 
contain  an aggregated plan-level  MLR, we analyzed each of these MLRs separately.  In 
our results, we use the terms managed care plans and plans to mean a single MLR  
for an entire plan, a specific Medicaid population, or a geographic area.   
Federal  MLR regulations consider plans to be non-credible if they have  less than 
5,400  member months for standard plans and less than 630  member months for 
MLTSS-only plans.  A non-credible  plan is assumed to meet  or exceed the 85-percent 
MLR standard or State-set minimum MLR, regardless of the plans calculated MLR.29   
We excluded from our analysis 26  plans that indicated  in their annual MLR reports 
that they were non-credible.  Eighty plans had annual MLR reports that did  not  
include  credibility information,  and some of  these annual MLR reports were also  
missing  information on member months.  We included these 80 plans in our analysis.  
Analysis of Plans  Annual  MLR Reports  
For the 513 annual MLR  reports in  our review, we analyzed the calculated  MLR 
contained in  each report.  For  the annual MLR reports that  contained  a credibility 
adjustment, the calculated  MLR includes the  credibility adjustment.30   However, we 
did not validate credibility adjustments based  on each plans member months.   
We examined the distribution of plans  calculated  MLRs and  determined the 
proportion of plans that reported MLRs of at least 85  percent.  We examined  
calculated  MLRs by plan size, using  revenue amounts listed  in plans annual MLR 
reports as a proxy for size.   For plans that had  MLR reporting periods that were 
shorter or longer than 12-months, we calculated  a 12-month revenue amount  based  
on their average monthly revenue.   For plans that were required to meet  State-set 
minimums, we compared the  calculated  MLR to the State-set  minimum MLR.  For 
plans that failed to meet State-set minimums, we identified the amounts by which 
plans had missed the State-set minimums and summarized  the reported  remittance  
amounts.  
 
  
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans  
Achieved their  Medical Loss Ratio Targets, OEI-03-20-00230                                                                  Detailed Methodology  | 12   Limitations  
We did not  independently verify the self-reported information from State Medicaid  
agencies or the information contained in the annual MLR reports that States received  
from  their Medicaid managed care plans.  However, we did, where possible, review  
the information for inconsistencies or missing data.  We followed  up with State 
Medicaid  agencies to resolve issues when identified.     
Standards  
We conducted this study in accordance with the Quality Standards for Inspection  and  
Evaluation  issued by the Council  of the Inspectors General on Integrity and Efficiency.   
Data Brief:  Nationwide, Almost All Medicaid  Managed Care  Plans  
Achieved their  Medical Loss Ratio Targets, OEI-03-20-00230                                                                  Detailed Methodology  | 13    
ACKNOWLEDGMENTS AND CONTACT  
 
Acknowledgments  
Amy Sernyak served as the team leader for this study.  Others in the Office of  
Evaluation and Inspections who conducted the study include Rebecca Laster and  
Craig  Diena.  Office of Evaluation and Inspections staff  who  provided support include  
Kevin Farber, Kevin  Manley, and Christine  Moritz.   
This report was prepared under the direction of  Linda  Ragone, Regional Inspector 
General for Evaluation and Inspections in the Philadelphia regional  office, and  
Joanna  Bisgaier, Deputy Regional Inspector General.  
Contact  
To obtain additional information concerning this report, contact the Office of Public 
Affairs at  Public.Affairs@oig.hhs.gov.  OIG reports and other information can be found  
on  the OIG website at  oig.hhs.gov.  
Office of Inspector General 
U.S. Department of Health and Human Services  
330 Independence Avenue, SW 
Washington, DC 20201  
Data Brief: Nationwide, Almost All  Medicaid Managed Care Plans  
Achieved their  Medical Loss Ratio Targets, OEI-03-20-00230                                                    Acknowledgments and Contact | 14    
EENNDDNNOOTTEESS   
 
 
1  Health Management Associates,  Medicaid Managed Care Spending in 2020, February 2021.   Accessed at 
https://www.healthmanagement.com/blog/medicaid-managed-care-spending-in-2020/  on April 22,  2021.   
2  81 Fed. Reg. 27498, 27521 (May 6, 2016).  
3  42 CFR  438.8(a) and  CMS,  Medicaid Managed Care  Frequently Asked Questions (FAQs)    Medical Loss Ratio,  June 2020.   
Accessed at  https://www.medicaid.gov/federal-policy-guidance/downloads/cib060520_new.pdf  on April  22, 2021.  The  Federal  
MLR requirements for managed care plans apply only to risk-based MCOs, PAHPs, and PIHPs, as defined in 42  CFR    438.2.  
However, PAHPs that deliver  only nonemergency medical transportation (NEMT) are exempted from the MLR requirements.   
For Vermont, the Federal MLR requirements apply to its single managed care plan, even though it is a non-risk-based PIHP.   
Therefore, we  included Vermonts plan in our analysis.    
4  42 CFR  438.8(d-f).  Although these Medicaid regulations include  expenditures on fraud  prevention activities in the  
numerator of the MLR formula, 42 CFR  438.8(e)(4) specifies that adoption of fraud prevention activities  in the MLR calculation 
would follow Federal private  insurance regulations at 45 CFR pt. 158.   According to CMS, the Medicaid  MLR formula does not 
include expenditures on fraud  prevention activities because these have not been outlined in 45 CFR pt. 158.   
5  42 CFR  438.8(a).  
6   42 CFR  438.8(b) and CMS,  Medicaid Managed Care  Frequently Asked Questions (FAQs)    Medical Loss Ratio,  June 2020.   
Accessed at  https://www.medicaid.gov/federal-policy-guidance/downloads/cib060520_new.pdf  on April  22, 2021.  States may  
select any 12-month period (e.g., the calendar year, the State fiscal year, the contract year, etc.) as the contract rating  period  
for each of their managed care plans.  Plans  within one State may have  different contract rating periods and therefore different 
MLR reporting years.  
7  42 CFR  438.8(k)(2).  States determine the manner and timeframe for the submission of MLR reports.  Reports must be  
submitted within 12  months of the end of the MLR reporting year.  
8  42 CFR  438.8(k).  
9  42 CFR  438.8(n).  
10  42 CFR  438.4(b)(9) and 81 Fed. Reg. 27499.  
11  42 CFR  438.5(b)(5).    
12  42 CFR  438.8(c).  
13  42 CFR  438.8(j).  
14  The OIG report numbers and  issue dates for  the seven audits are:  The Medicaid Program Could have Achieved Savings if  New  
York Applied Medical Loss Ratio Standards Similar to Those Established by the Affordable Care Act  (A-02-13-01036,  
October  2015);  The Medicaid Program Could Have Achieved Savings if Oregon Had Applied Medical Loss Ratio Standards Similar 
to Those Established by the Affordable Care Act  (A-09-15-02033, April  2016);  Review of Massachusetts Medicaid Managed Care  
Program Potential Savings With  Minimum Medical Loss Ratio  (A-01-15-00505, November 2016);  Review of South Carolinas 
Medicaid Managed Care Program Potential Savings With Minimum Medical Loss Ratio,  (A-04-16-06191, December  2016);  Review 
of California Medicaid Managed-Care Program Potential Savings With Minimum Medical Loss Ratio  (A-09-15-02025,  
January  2017);  Review of Wisconsin Medicaid Managed Care  Program Potential Savings With Minimum Medical Loss Ratio  
(A-05-15-00040, June  2017); and  Review of Pennsylvania Medicaid Managed Care Program Potential Savings With Minimum  
Medical Loss Ratio  (A-03-15-00203,  July 2017).  
 
Data Brief:  Nationwide, Almost All Medicaid Managed  Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Endnotes | 15    
15  Eight States reported that they did not contract with any Medicaid managed care plans subject to Federal MLR requirements 
as of September 2020.  The Federal MLR requirements for  managed care  plans apply only to MCOs, PIHPs, and PAHPs,  as  
defined in 42  CFR    438.2.  
16  As part of OIGs information request, we asked States to provide, for each plan, the most recent annual  MLR report that had  
also been reviewed by the State.  If the State had not yet reviewed a  plans  most recent annual MLR report, we requested the  
prior report.  Alternatively, if the State had not yet reviewed  any of a plans annual MLR reports, we requested the most recent 
of the pre-review reports.  We analyzed 376 reviewed and  137 pre-review annual MLR reports from the States.  
17  There were 12  cases  in which States sent annual MLR reports for plans that were no longer under contract with the State as  
of September  1,  2020.  We included these  reports in our analysis.  
18  For 11 plans in 1 State, we used remittance  data contained in a separate  document that the State provided to us.  
19  States may require plans to calculate  and report MLRs  separately for specific populations covered under the plan contract.  If 
States do not require such population-based MLR reporting, plans must aggregate MLR data to include all covered 
populations and submit plan-based annual  MLR reports to the State.  See 42 CFR  438.8(i).  
20  One State lowers minimum  MLRs if an MCO meets certain quality metrics.  The State sets the minimum MLR at 89 percent,  
and if an MCO  achieves any of four quality metrics, the State lowers the minimum MLR.  If  an MCO achieves one quality metric,  
the MCOs minimum MLR would be 88 percent.  If an MCO  achieves all four quality metrics, the MCOs minimum MLR would  
be 85 percent.  Another State sets the minimum MLR according to the type of service provided  by its plans.  This  State sets  
different minimum MLRs for the acute and managed long-term services and supports services  within those plans.  
21  If States collect remittance money from plans, the States must reimburse  CMS for an amount equal to the Federal share of  
the remittance.  See 42 CFR   438.74(b).  
22  Under risk corridor arrangements, States and plans agree to  share profit or losses (at percentages specified in plan contracts) 
if aggregate spending falls above or below specified thresholds (two-sided risk corridor).  Kaiser Family Foundation,  Medicaid 
Managed Care  Rates and Flexibilities: State Options to Respond to COVID-19 Pandemic, September 2020.  Accessed at 
https://www.kff.org/medicaid/issue-brief/medicaid-managed-care-rates-and-flexibilities-state-options-to-respond-to-covid-
19-pandemic/  on July 19,  2021.  
23  CMS,  Medical  Loss Ratio (MLR) Credibility Adjustments, July  2017.  Accessed at 
https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib073117.pdf  on January  5, 2021.  
24  42 CFR  438.4(b)(9).  
25  Eight States reported that they did not contract with any Medicaid managed care plans subject to Federal MLR requirements 
as of September 2020.  The Federal MLR requirements for  managed care  plans apply only to MCOs, PIHPs, and PAHPs,  as  
defined in 42  CFR    438.2.  
26  As part of OIGs information request, we asked States to provide, for each plan, the most recent annual  MLR report(s) that 
had also been reviewed by the State.  If the State had not yet reviewed a plans most recent annual MLR report(s), we  
requested the  prior report.  Alternatively, if the State had not yet reviewed  any of a plans annual MLR reports, we requested 
the most recent of the pre-review reports.   We analyzed 376 reviewed  and 137 pre-review annual MLR reports from the  
States.  
27  There were 12 cases in which States sent annual MLR reports for plans that were no longer under contract with the State as  
of September  1,  2020.  We included these  reports  in our analysis.  
28  States may require plans to calculate  and report MLRs  separately for specific populations covered under the plan contract.  If 
States do not require such population-based MLR reporting, plans must aggregate  MLR data to include all covered 
populations and submit plan-based annual  MLR reports to the State.  See 42 CFR  438.8(i).  
 
Data Brief:  Nationwide, Almost All Medicaid Managed  Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Endnotes | 16    
29  CMS,  Medical  Loss Ratio (MLR) Credibility Adjustments, July  2017.  Accessed at 
https://www.medicaid.gov/sites/default/files/federal-policy-guidance/downloads/cib073117.pdf  on January  5, 2021.  
30  For standard  plans with 5,400 to 380,000  member months and MLTSS only  plans with 630 to 45,000  member months,  
Federal MLR regulations allow them to add a credibility adjustment to their calculated MLRs to account for random statistical  
variation related to the number of enrollees  in a plan.  See 42 CFR  438.8(h) and CMS,  Medical Loss Ratio (MLR) Credibility  
Adjustments, July  2017.  Accessed at https://www.medicaid.gov/sites/default/files/federal-policy-
guidance/downloads/cib073117.pdf  on January  5, 2021.  
Data Brief:  Nationwide, Almost All Medicaid Managed  Care  Plans Achieved their Medical Loss Ratio Targets 
OEI-03-20-00230   Endnotes | 17