On December 7, 2011, the U.S. Department of Health and Human Services ("HHS") and the Centers for Medicare & Medicaid Services ("CMS") issued a final rule (the "Final Rule") revising medical loss ratio ("MLR") requirements under the Patient Protection and Affordable Care Act ("PPACA"), as well as an interim final rule (the "Interim Final Rule") specifically addressing the rebate requirements for non-federal governmental plans (the Final Rule and the Interim Final Rule are collectively the "Rules").

The MLR requirements, which took effect on January 1, 2012, apply to insured group health plans and individual health plans, including health plans that are grandfathered under PPACA. They do not apply to self-insured plans. Insurers are required to provide rebates to policyholders when their spending for covered plan benefits and quality improving activities in relation to the premiums received falls below the applicable MLR standard for the MLR reporting year. The rebates are determined based on the premium costs of insured coverage, as distinguished from pharmaceutical or manufacturer rebates common to the health care industry. The purpose of the Rules is to reduce the cost of health care coverage by limiting the amount of premium available to insurers to spend on administrative costs and purposes other than the provision of health care services.