On May 20, 2013, the Centers for Medicare and Medicaid Services (CMS) released the final regulations on the Affordable Care Act’s (ACA) medical loss ratio (MLR) requirements for Medicare Advantage and Medicare Prescription Drug Benefit Programs (PDP). The final MLR rule is largely identical to the proposed rule and generally tracks the requirements of the commercial insurance MLR rule. Under the final rule, Medicare Advantage Organizations (MAOs) and Part D sponsors must spend at least 85% of their contract revenue (including member premiums) on clinical services, prescription drugs, quality improving activities, and direct benefits to beneficiaries via reduced Part B premiums. The MLR is reported on a contract basis and calculated during a one-year contract period. The MLR rule will be effective January 1, 2014, and the first year of reporting will be 2015. Plans failing to meet MLR requirements for three or more consecutive contract years may be suspended from enrollment, and failing to meet the requirements for five consecutive contract years will result in termination of the contract. For additional detail on the Medicare Advantage and PDP MLR rule and its implications, please see the summary of the proposed rule here. The final rule is available here.