Georgia Medicaid Medical Loss Ratio: A Complete Guide to 42 CFR 438.8 and the 85 Percent MLR Floor

::: hero Georgia Medicaid Medical Loss Ratio

Georgia pays billions of dollars annually in capitation to the four Care Management Organizations that deliver Medicaid benefits to millions of Georgians. The most important question about that money, from a policy and family perspective, is how much of it actually reaches member care versus how much disappears into administration, marketing, executive compensation, and profit. Before the Affordable Care Act, this question had no federal answer in the Medicaid managed care context. CMOs could, in principle, spend forty percent of capitation on administration and profit, with no federal floor forcing them to direct revenue to actual member services. In practice, most CMOs operated above sixty or seventy percent medical spending, but variance was wide and accountability was minimal.

The Medical Loss Ratio (MLR) framework, codified at 42 CFR 438.8, fixed this. Under the CMS 2016 Medicaid Managed Care Final Rule, every Medicaid Care Management Organization must spend at least 85 percent of capitation revenue on medical care plus approved quality improvement activities. The remaining 15 percent or less covers administration, marketing, executive compensation, and profit. CMOs that fall below the 85 percent floor may have to remit the difference back to the state. The framework is structurally analogous to the ACA Section 2718 commercial insurance MLR but with Medicaid-specific definitions of what counts as medical care, what counts as quality improvement, and what counts as administration.

This guide translates the MLR framework for Georgia families and providers. We walk through the federal architecture (Section 1903(m) authority and 42 CFR 438.8 implementing regulations), what counts in the numerator versus the denominator, how quality improvement activities are categorized, how the credibility adjustment helps small plans, how aggregation rules work for multi-state CMOs, how annual MLR reports are submitted and audited, how remittance back to the state operates, how Georgia's DCH oversees the four CMOs (Amerigroup, CareSource, Peach State, Wellpoint), and the practical implications for member experience. The goal is to demystify a federal accountability framework that is technically complex but consequential for the practical shape of Georgia Medicaid.

If you have questions about Georgia Medicaid coverage that touches on this framework (network adequacy, prior authorization, quality), call DCH Member Services at 1-866-211-0950 or your CMO. For policy questions about MLR specifically, the DCH Office of Financial Management and Office of Audits and Compliance are starting points. :::

::: callout Key takeaways

1. The MLR floor is 85 percent under 42 CFR 438.8. Care Management Organizations must spend at least 85 percent of capitation revenue on medical care plus approved quality improvement activities.
2. Administration and profit cannot exceed 15 percent. The remaining portion of capitation covers all administrative overhead, marketing, executive compensation, and profit margin.
3. The numerator includes medical claims plus QIA. Approved quality improvement activities count alongside medical claims paid in the MLR numerator.
4. The denominator is premium revenue minus specific exclusions. Federal taxes, state premium taxes, and risk corridor payments are excluded; risk corridor recoveries are added back.
5. Remittance returns excess profit to the state. When MLR falls below 85 percent, CMOs may have to remit the difference back to Georgia under contract.
6. Annual MLR reports are required. CMOs submit detailed annual reports to DCH following the CMS template, with classification of medical, QIA, and administrative expenses.
7. DCH audits MLR reports. The Office of Audits and Compliance reviews encounter data validation, classification decisions, and methodology compliance.
8. MLR data feeds back into rate-setting. Trends in MLR inform future capitation rate development, with persistent over- or under-performance prompting rate adjustments. :::

What the MLR is and why it matters

By Brevy Care Team · Last verified May 12, 2026

The Medical Loss Ratio is, at its simplest, the percentage of premium revenue that an insurer spends on medical care. If a Care Management Organization receives $100 in capitation and spends $87 on medical claims and quality improvement, its MLR is 87 percent. The other $13 covers administration, marketing, executive compensation, and profit.

The 85 percent federal floor under 42 CFR 438.8 means that for every dollar Georgia pays its CMOs, at least 85 cents must reach member care. The 15 cents (or less) of overhead is, in theory, what the CMO needs to operate: paying its claims processors, its provider relations staff, its member service representatives, its care coordinators, and the modest profit that allows it to continue operating.

The framework is meant to prevent a particular failure mode. Without an MLR floor, a CMO could theoretically spend forty percent on administration and profit and only sixty percent on care, particularly during periods when capitation rates are high or member utilization is low. The capitation flows would generate substantial profits without commensurate investment in member services. The 85 percent floor closes off this failure mode.

The framework also creates a soft incentive structure. CMOs operating well above the floor (e.g., 92-95 percent MLR) are returning most of capitation to members; CMOs operating just at the floor have more room for administrative inefficiency and profit. While MLR is not a perfect quality measure (a CMO can have high MLR through inefficient care delivery rather than high-quality care), it correlates broadly with member-experience outcomes including network adequacy, prior authorization rigor, and member service quality.

The federal statutory framework

The MLR framework rests on a small set of federal authorities, primarily 42 CFR 438.8 with backing from broader Medicaid managed care statutes.

Section 1903(m) SSA: federal financial participation in managed care

Section 1903(m) of the Social Security Act conditions federal financial participation (FFP) in Medicaid managed care on a set of requirements including actuarially sound capitation rates and beneficiary protections. The MLR framework operates within this Section 1903(m) authority because the MLR is an accountability mechanism that ensures the capitation flows authorized under Section 1903(m) are used for their intended purpose.

Section 1902(a)(4) SSA: proper and efficient administration

Establishes the federal expectation that Medicaid programs operate with proper and efficient administration. The MLR is one mechanism by which this expectation is enforced for managed care.

ACA Section 2718: commercial insurance MLR analog

The Affordable Care Act Section 2718 established an MLR requirement for commercial insurance, with different percentage thresholds depending on market segment. The commercial MLR framework, in turn, was based on the National Association of Insurance Commissioners (NAIC) MLR Model Regulation.

The Medicaid MLR at 85 percent is structured similarly to the commercial framework, but with Medicaid-specific definitions:

• Medicaid medical claims definitions are aligned with Medicaid covered services
• Medicaid QIA criteria reflect Medicaid quality programs (HEDIS measures, PIPs, etc.)
• Medicaid premium denominator definitions reflect capitation rather than commercial premium
• Medicaid aggregation rules account for state-specific products

The commercial-Medicaid alignment matters because national MCO parents (Centene, Elevance, etc.) operate both Medicaid and commercial lines, and consistent MLR principles facilitate cross-line operational alignment.

The central regulation: 42 CFR 438.8

42 CFR 438.8 is the central regulation governing Medicaid MLR. It implements the framework with detailed technical rules.

42 CFR 438.8(b): the 85 percent floor

States must require Medicaid MCOs to operate at an MLR of at least 85 percent. States can require higher MLR (some states have considered 90 percent floors, though most align with the federal 85 percent).

Georgia applies the 85 percent floor under its CMO contracts.

42 CFR 438.8(c): MLR numerator components

The numerator (what counts as "medical loss") includes:

Medical claims paid. Claims for services rendered to members during the reporting period, including:

• Inpatient hospital
• Outpatient hospital
• Physician and other professional services
• Behavioral health services (including mental health and substance use disorder treatment)
• Prescription drugs
• Durable medical equipment
• Home health services
• Long-term services and supports where covered
• Dental and vision where covered
• All other Medicaid-covered services

Claims are counted on a paid-claims basis, with adjustments for incurred-but-not-reported (IBNR) claims to align with the reporting period.

Quality Improvement Activities (QIA). Approved activities that meet specific federal criteria. QIA must:

• Improve health outcomes
• Prevent hospital readmissions
• Improve patient safety and reduce medical errors
• Improve wellness and health promotion
• Increase health information technology that enhances quality

The 2016 Final Rule established detailed QIA categories and CMS guidance has further refined them.

Direct health-care fraud detection and reduction expenses. Limited inclusion of fraud detection expenses in the numerator. The 2016 rule allows a portion of these expenses but with constraints.

42 CFR 438.8(d): MLR denominator components

The denominator (the base against which the numerator is divided) includes:

• Premium (capitation) revenue received from the state for the reporting period
• Minus federal taxes paid on the premium revenue
• Minus state premium taxes paid
• Minus regulatory fees paid to state insurance departments and similar
• Minus risk corridor payments to the state (if applicable)
• Plus risk corridor recoveries from the state (if applicable)

Other adjustments may apply for specific reporting circumstances.

42 CFR 438.8(e): remittance requirements

States may require remittance back to the state when MLR falls below 85 percent. The amount of remittance is typically the difference between actual MLR and the floor, applied to premium revenue. For example, if a CMO's actual MLR is 80 percent against $100 million in capitation, the shortfall is 5 percent of $100 million = $5 million remittance.

Not all states require remittance. The specific remittance structure is determined by state contract. Georgia's CMO contracts include remittance provisions.

42 CFR 438.8(f): reporting requirements

MCOs must submit annual MLR reports to the state. Reports include:

• Total premium revenue
• Medical claims paid (with breakdowns by service category)
• QIA expenses (with documentation of activities)
• Administrative expenses (with breakdowns by category)
• Profit margin
• Calculated MLR
• Documentation of methodology and assumptions
• Sub-contractor cost detail where applicable

Reports must be submitted on specific timelines after the MLR reporting year. Federal regulations specify reporting templates and deadlines.

42 CFR 438.8(g): credibility adjustment

Small MCOs whose enrollment is insufficient to produce statistically reliable MLR calculations can apply a credibility adjustment. The adjustment recognizes that small enrollment leads to higher random variation in MLR (a single catastrophic claim can swing a small plan's MLR significantly).

The credibility adjustment is based on a sliding scale tied to member months. Plans with very high member months receive no adjustment because their data is presumed fully credible. Plans with lower member months receive incremental adjustments.

The credibility adjustment is added to the calculated MLR to determine the reported MLR for compliance purposes.

42 CFR 438.8(h): aggregation and exclusions

Rules for when multi-state or multi-product MCOs can combine calculations:

• Generally, MCOs cannot aggregate across states for Medicaid MLR purposes
• Generally, MCOs cannot aggregate across Medicaid and non-Medicaid lines of business
• Aggregation across product lines within a state's Medicaid program may be allowed in specific circumstances

These aggregation rules prevent national MCO parents from offsetting state-level MLR shortfalls with national surpluses.

Federal guidance

CMS 2016 Medicaid Managed Care Final Rule

The 2016 rule first applied a federal MLR floor to Medicaid managed care. Before 2016, Medicaid managed care had no federal MLR requirement, though some states applied state-level requirements. The 2016 rule:

• Established the 85 percent floor
• Defined numerator and denominator components
• Established reporting requirements
• Established remittance options for states
• Provided credibility adjustment framework
• Aligned conceptually with ACA Section 2718 commercial MLR

CMS 2020 Medicaid Managed Care Final Rule

The 2020 rule refined certain aspects of the MLR framework:

• Provider incentive payment rules (clarifying that certain VBP arrangements count toward MLR)
• Reporting requirement refinements
• Aggregation rule clarifications

CMS 2024 Medicaid Managed Care Access Final Rule

The 2024 rule strengthened network adequacy and access standards. The interaction with MLR is important: adequate MLR enables CMOs to pay providers at rates that support network adequacy. The 2024 rule's enforceable appointment wait time standards depend on adequate provider payment, which depends on rate adequacy and MLR compliance.

CMS State Medicaid Director Letter on MLR Implementation

Implementation guidance on MLR for state Medicaid agencies. The letter addresses implementation timeline, reporting templates, audit expectations, and coordination with rate-setting.

CMS Medicaid Managed Care MLR Reporting Template

Standard format for MLR reports, ensuring consistency across states and plans.

Categorizing expenses: medical vs QIA vs administration

The classification of expenses is the operational heart of MLR compliance and audit. The lines between categories can be subjective and have material financial impact.

Medical Claims: counted in numerator

Claims for services delivered to members during the reporting period. Categories include:

• Inpatient and outpatient hospital
• Physician and other professional services
• Behavioral health services
• Prescription drugs
• Durable medical equipment and supplies
• Home health
• Long-term services and supports
• Dental and vision where covered
• Transportation where covered
• All other Medicaid-covered services

Claims are reported on an incurred basis with IBNR adjustments.

Quality Improvement Activities (QIA): counted in numerator

QIA must meet specific federal criteria. The 2016 rule and subsequent CMS guidance established categories:

Improving health outcomes. Care coordination programs, chronic disease management, preventive care initiatives.

Preventing hospital readmissions. Discharge planning, post-discharge follow-up, care transition programs.

Improving patient safety and reducing medical errors. Provider training, evidence-based protocols, quality improvement collaboratives.

Wellness and health promotion. Health education, screening promotion, behavioral interventions.

Health information technology for quality. Specific HIT investments that demonstrably improve quality (not general HIT infrastructure).

Performance improvement projects. PIPs required under 42 CFR 438.330.

Provider training on evidence-based care. Training programs that change provider practice.

Activities that look like quality improvement but do not meet QIA criteria are classified as administration:

• General administrative information technology
• Claims processing systems
• General marketing
• Sales activities
• Lobbying
• General overhead allocations
• Routine member outreach

Administration: not counted in numerator

Administration includes:

• General administrative overhead
• Claims processing (the operational function of processing claims)
• Member services call centers (general)
• Provider relations
• Marketing and sales
• Lobbying
• Executive compensation
• Legal and compliance overhead
• Technology systems supporting general operations
• Profit margin

Direct Health Care Fraud Detection: limited inclusion

A limited portion of fraud detection expenses can be included in the numerator under specific conditions. The detail is in CMS guidance.

The classification challenge

Classification decisions can be subjective. Common contested areas:

• Care management vs administration. Care management programs may straddle the line between QIA (when they demonstrably improve outcomes) and administration.
• HIT classification. General HIT is administration; HIT supporting specific quality improvement is QIA. The line is fact-specific.
• Member education. Routine outreach is administration; educational activities meeting QIA criteria can count.
• Subcontractor cost passthrough. Behavioral health subcontractor costs flow through, but classification of the subcontractor's own administrative load is complex.

State auditing of classification decisions is an important check on aggressive classification that would artificially inflate MLR.

Georgia implementation

DCH CMO Contract MLR Provisions

Georgia's contracts with the four CMOs (Amerigroup, CareSource, Peach State, Wellpoint) include MLR provisions implementing 42 CFR 438.8:

• 85 percent MLR floor
• Annual MLR reporting timeline
• Remittance requirements when MLR falls below 85 percent
• Audit rights for DCH
• Coordination with rate-setting
• Data submission requirements
• Subcontractor cost reporting

DCH MLR Reporting Process

CMOs submit annual MLR reports to DCH following the federal CMS reporting template. The process:

1. Reporting year ends. Typically aligned with the contract year or calendar year.
2. CMO compiles MLR report. With detailed expense categorization, QIA documentation, and methodology disclosure.
3. Report submitted to DCH by the contractual deadline.
4. DCH review. Office of Financial Management and Office of Audits and Compliance review the report.
5. Supporting documentation requests. DCH may request additional documentation.
6. Audit if warranted. DCH may conduct or commission audits of specific CMO MLR reports.
7. Remittance determination. If MLR falls below 85 percent, remittance is calculated and demanded.
8. CMS reporting. DCH reports state-level MLR data to CMS.

DCH Office of Financial Management

The OFM coordinates MLR oversight with rate-setting:

• Monitors MLR trends across CMOs
• Identifies outliers (very high or very low MLR)
• Considers MLR data in future rate development
• Coordinates with the state actuary on MLR-rate interactions
• Coordinates remittance if applicable
• Reports state-level MLR data to CMS Region IV

DCH Office of Audits and Compliance

Audits CMO MLR reports including:

• Encounter data validation (does the medical claims claim match the actual encounters?)
• Expense classification review (are administrative costs improperly classified as QIA?)
• QIA classification review (do the claimed QIA activities meet federal criteria?)
• Subcontractor cost passthrough analysis
• Aggregation rule compliance
• Credibility adjustment application

Coordination with Rate-Setting

MLR data feeds back into rate-setting:

• Consistently high MLR (e.g., 90+ percent) may suggest rates are too low for the population/service mix and prompt rate increases
• Consistently low MLR (e.g., below 85 percent) prompts remittance and may signal rate adequacy questions, potentially leading to rate adjustments in future cycles
• MLR variance across rate cells informs cell-level rate development
• Subcontractor MLR dynamics inform how subcontracted services (especially behavioral health) are funded

Georgia Insurance Department

The Insurance Department oversees CMO solvency under state insurance law. MLR data is relevant to solvency assessment because:

• A CMO consistently above 90 percent MLR may have insufficient margin to maintain reserves
• A CMO below 85 percent MLR may have administrative bloat that affects sustainability

CMS Region IV Oversight

CMS Region IV reviews Georgia's MLR oversight as part of broader managed care oversight. Region IV may:

• Audit specific CMO MLR reports
• Review DCH's audit and classification decisions
• Coordinate with HHS-OIG on potential fraud or misclassification
• Provide technical assistance on MLR implementation

Encounter Data Foundation

MLR depends on accurate encounter data. CMOs submit detailed encounter data to DCH on services rendered. The encounter data:

• Documents medical claims paid (the MLR numerator's largest component)
• Provides the basis for DCH validation of medical expense claims
• Supports program integrity oversight
• Informs future rate development

If encounter data is inaccurate, MLR calculations are unreliable. DCH's encounter data validation is therefore foundational to MLR oversight.

Practical implications for Georgia families

MLR floor ensures most capitation reaches care

The 85 percent floor means that for every dollar Georgia pays CMOs, at least 85 cents must go to medical care plus QIA. This is the federal mechanism that prevents CMOs from pocketing the bulk of revenue. Before the 2016 rule, no such floor existed, and variance in administrative spending was wide.

Higher MLR generally correlates with better access

CMOs operating at high MLR (e.g., 92-95 percent) are spending the bulk of revenue on member care. CMOs operating just at the floor have more administrative overhead and profit. Higher MLR generally correlates with:

• Better network adequacy (more provider payments)
• More value-added services
• Better member service responsiveness
• More care coordination investment

The correlation is not perfect; a CMO can have high MLR through inefficient medical care delivery rather than high-quality care.

Remittance returns excess profit to the state

When a CMO operates below 85 percent MLR, remittance back to the state returns the excess profit. This money can support future capitation, supplemental payments, or other Medicaid expenditures. Without remittance, CMOs would have less incentive to maintain MLR compliance.

Classification matters

The line between QIA and administration can be subjective. Aggressive classification (counting administration as QIA) artificially inflates MLR. DCH auditing of classification is an important check, particularly for:

• Care management programs (QIA or administration?)
• HIT investments (QIA or general overhead?)
• Member outreach (educational QIA or marketing administration?)

MLR is not a perfect quality proxy

A CMO can have high MLR through inefficient medical care delivery rather than high-quality care. The MLR framework complements but does not replace other quality measures (HEDIS, CAHPS, EQRO). Families considering CMO selection should look at multiple measures, not MLR alone.

MLR affects future rates

The feedback from MLR to rate-setting means today's MLR performance affects tomorrow's capitation. Persistent high MLR may signal underpayment and prompt rate increases. Persistent low MLR signals overpayment and prompts rate decreases or stricter accountability.

Worked examples

The following six scenarios illustrate how MLR operates in practice.

CMO X operating at 87 percent MLR

CMO X is a Georgia CMO with $1 billion in annual capitation revenue. Its annual MLR report shows:

• Medical claims paid: $830 million
• Quality Improvement Activities: $40 million
• Administration: $110 million
• Profit margin: $20 million

Total numerator (medical + QIA): $870 million Denominator (premium minus exclusions): $1 billion approximately MLR: 87 percent

CMO X is in compliance with the 85 percent floor. No remittance is required. The CMO is operating with healthy margin and quality investment. DCH's review confirms classification is appropriate.

CMO Y operating at 82 percent MLR

CMO Y has $800 million in annual capitation revenue. Its MLR report shows:

• Medical claims paid: $580 million
• Quality Improvement Activities: $76 million
• Administration: $120 million
• Profit margin: $24 million

Numerator: $656 million Denominator: $800 million MLR: 82 percent

CMO Y is below the 85 percent floor by 3 percentage points. The remittance calculation: 3 percent of $800 million = $24 million remittance to the state. CMO Y must remit $24 million.

Beyond remittance, the persistent low MLR signals administrative bloat or pricing problems. Future rate development may reflect this finding. DCH may also commission an audit of the CMO's expense classification.

CMO Z classifying QIA activities

CMO Z has a sophisticated care management program for high-utilizers. The program includes:

• Predictive analytics to identify high-risk members
• Care managers who reach out to members proactively
• Coordination with providers on care plans
• Member education on disease management

CMO Z's MLR report classifies $50 million of this program as QIA. DCH audits the classification:

• Predictive analytics infrastructure: classified as administration (general HIT, not directly improving quality)
• Care manager activities: classified as QIA (directly improving outcomes)
• Provider coordination: classified as QIA (improving care coordination)
• Member education: classified partially as QIA (where it meets educational criteria) and partially as administration (where it is general outreach)

DCH adjusts the classification: $35 million approved as QIA, $15 million reclassified as administration. CMO Z's MLR is reduced from its self-reported 88 percent to 84 percent. Remittance applies on the 1 percent shortfall.

CMO W behavioral health subcontractor

CMO W contracts with a behavioral health subcontractor (a typical arrangement). The subcontractor delivers behavioral health services to members. The subcontractor charges CMO W a capitation for those services.

How this flows through CMO W's MLR:

• CMO W pays subcontractor $100 million
• Subcontractor uses $90 million for actual behavioral health services and $10 million for its own administration and profit
• CMO W classifies the entire $100 million as medical claims in its MLR (because the subcontract is for medical services)
• BUT the subcontractor's $10 million administrative load is effectively counted as medical in CMO W's MLR

This passthrough dynamic is operationally complex and a frequent subject of CMS guidance. CMOs cannot use subcontracting to circumvent MLR by routing administrative costs through subcontractors.

State auditing CMO MLR report

DCH's Office of Audits and Compliance conducts an audit of a CMO's MLR report. The audit examines:

• Encounter data: Are the medical claims claimed actually documented in encounters? Random sampling of 1,000 encounters confirms 98 percent documented.
• QIA classification: Does each claimed QIA activity meet federal criteria? Review of 50 randomly selected QIA activities finds 4 reclassified as administration.
• Subcontractor passthrough: Are subcontractor costs properly classified? Review of subcontractor agreements finds appropriate classification.
• Aggregation rules: Has the CMO aggregated improperly across states? Review of corporate structure confirms no cross-state aggregation.

The audit finds the CMO's MLR is overstated by 0.5 percentage points. The CMO corrects the report and the corrected MLR is reported to CMS.

Member experience tied to MLR

How does MLR affect what families actually experience?

• CMO with high MLR (92 percent). Strong network adequacy, more specialty access, more value-added services, more care coordination support.
• CMO with floor-level MLR (85 percent). Adequate network, more aggressive utilization management, fewer value-added services, member service may be less responsive.
• CMO with below-floor MLR (82 percent). Remittance required, possible network adequacy issues, member service problems, sustainability concerns.

The relationship between MLR and member experience is not deterministic, but the correlation is real and meaningful.

Frequently asked questions

::: accordion Q: What is medical loss ratio? A: Medical loss ratio is the percentage of premium revenue that an insurer spends on medical care plus quality improvement activities. For Medicaid CMOs, the federal floor is 85 percent under 42 CFR 438.8. The remaining 15 percent or less covers administration, marketing, executive compensation, and profit.

Q: Why is the MLR floor 85 percent? A: The 85 percent floor was established by the CMS 2016 Medicaid Managed Care Final Rule, aligned conceptually with the ACA Section 2718 commercial insurance MLR. The 85 percent figure represents a federal judgment about how much capitation should reach member care versus overhead. Some advocates have called for raising the floor; the federal regulation currently sets 85 percent.

Q: What counts as medical care in MLR? A: Medical claims paid for services rendered to members during the reporting period, including inpatient and outpatient hospital, professional services, behavioral health, prescription drugs, DME, home health, LTSS, dental, vision, and other Medicaid-covered services.

Q: What counts as Quality Improvement Activities (QIA)? A: Activities meeting specific federal criteria, including care management programs that improve outcomes, readmission prevention, patient safety initiatives, wellness programs, HIT specifically supporting quality improvement, performance improvement projects, and provider training on evidence-based care.

Q: What does NOT count as QIA? A: General administration, claims processing, general HIT infrastructure, marketing, sales, lobbying, executive compensation, and general overhead allocations. Activities that look like quality improvement but do not meet federal criteria are administration, not QIA.

Q: What happens if a CMO's MLR falls below 85 percent? A: Under Georgia's contracts, remittance back to the state is typically required. The remittance is calculated as the difference between actual MLR and the floor, applied to premium revenue. So a CMO at 82 percent MLR against $100 million in premium would remit 3 percent of $100 million = $3 million.

Q: What is the credibility adjustment? A: The credibility adjustment at 42 CFR 438.8(g) allows small MCOs whose enrollment is insufficient to produce statistically reliable MLR calculations to adjust their reported MLR. The adjustment is on a sliding scale tied to member months. Plans with very high member months receive no adjustment; smaller plans receive incremental adjustments.

Q: Can a national MCO offset MLR shortfalls in one state with surpluses in another? A: Generally no. Aggregation rules at 42 CFR 438.8(h) prohibit cross-state aggregation for Medicaid MLR purposes. National MCOs must report state-specific MLR and meet the floor on a state-by-state basis.

Q: How does MLR relate to rate setting? A: MLR data feeds back into rate setting. Consistently high MLR (above 90 percent) may suggest rates are too low and prompt rate increases. Consistently low MLR (below 85 percent) prompts remittance and may signal rate adequacy questions. State actuaries use historical MLR data when developing future capitation rates.

Q: What is the difference between MLR and Quality measures like HEDIS? A: MLR is a financial measure (percentage of revenue spent on care). HEDIS measures specific clinical quality outcomes (e.g., diabetes A1c control, well-child visit rates). Both measures matter but they measure different things. A CMO can have high MLR with weak HEDIS performance (inefficient spending on care) or low MLR with strong HEDIS performance (efficient high-quality care).

Q: How does Georgia audit CMO MLR reports? A: DCH's Office of Audits and Compliance reviews encounter data validation, expense classification, QIA criteria compliance, subcontractor cost passthrough, aggregation rules, and credibility adjustment application. Audits may include sampling of encounters and review of underlying documentation.

Q: What is the medical loss ratio for Georgia CMOs? A: Specific MLR figures vary by CMO and year. DCH publishes aggregate information; specific CMO MLR figures may be released in DCH reports or through public records requests. The federal floor is 85 percent; most CMOs operate above the floor.

Q: How does the 2024 CMS Managed Care Access Final Rule affect MLR? A: The 2024 rule strengthened network adequacy and access standards but did not directly change the 85 percent MLR floor. The interaction is important: adequate MLR enables CMOs to pay providers at rates that support network adequacy. The 2024 rule's enforceable appointment wait time standards depend on adequate rate adequacy and MLR compliance.

Q: Does MLR apply to fee-for-service Medicaid? A: No. MLR is a managed care framework that applies to CMOs receiving capitation. Fee-for-service Medicaid pays providers directly for services rendered; there is no analogous percentage-of-revenue framework.

Q: How does MLR interact with state-directed payments? A: State-directed payments under 42 CFR 438.6(c) flow through CMOs to specific providers. These payments are typically classified as medical claims in MLR (counted in the numerator). The 2020 final rule clarified treatment of certain state-directed payments.

Q: What happens to remittance funds? A: Remittance funds return to the state. The funds typically flow into the state's Medicaid program (general fund or specific Medicaid accounts) and can support future capitation, supplemental payments, or other Medicaid expenditures.

Q: Can families see their CMO's MLR? A: Aggregate state-level MLR information may be published by DCH. Individual CMO MLR may be available through DCH reports or public records requests. Federal CMS publications may also include state-level MLR data.

Q: Why does MLR vary across CMOs in the same state? A: MLR variance reflects differences in administrative efficiency, care management investment, network composition, member populations, classification decisions, and operational scale. Within Georgia's four CMOs (Amerigroup, CareSource, Peach State, Wellpoint), MLR may vary by several percentage points reflecting these underlying differences.

Q: What if Brevy.com has more questions I want to read about? A: Brevy.com publishes detailed guides on Georgia Medicaid managed care plans (the four CMOs), managed care quality, rate setting and actuarial soundness, MCO enrollment and disenrollment, supplemental payments and UPL, encounter data and program integrity, and fraud, waste and abuse program integrity. Visit brevy.com for the full Georgia Medicaid library. :::

How to get more information about Georgia Medicaid MLR

::: cta Where to call for help and information

• DCH Medicaid Member Services: 1-866-211-0950
• DCH Office of Financial Management: Through DCH main line
• DCH Office of Audits and Compliance: Through DCH main line
• Amerigroup Member Services: See the back of your member ID card or amerigroup.com
• Peach State Health Plan: See the back of your member ID card or peachstatehealth.com
• CareSource Georgia: See the back of your member ID card or caresource.com
• Wellpoint Georgia: Through DCH Member Services
• Georgia Insurance Department: Through Georgia.gov
• Georgia State Auditor: Through Georgia.gov
• DFCS eligibility offices: Find your county office at dfcs.georgia.gov
• Georgia Gateway: gateway.ga.gov
• AARP Georgia: See aarp.org for local contact information
• 211 Georgia: Dial 211
• Georgia Legal Services Program: See georgialegalservices.org for office locations
• Disability Rights Georgia: See disabilityrightsga.org for contact information

For member-level questions about coverage, network access, or specific services, call DCH Member Services or your CMO. For policy questions about MLR specifically, the DCH Office of Financial Management and Office of Audits and Compliance are starting points. For independent analysis, the Georgia Hospital Association and academic centers track Medicaid policy. For legal help with denial issues that may reflect MLR-related dynamics, contact Georgia Legal Services or Disability Rights Georgia. :::

Final notes

The Medical Loss Ratio is one of the most consequential federal accountability mechanisms in Medicaid managed care. The 85 percent floor under 42 CFR 438.8 ensures that the bulk of capitation revenue reaches member care rather than administrative bloat and profit. Without the MLR framework, CMOs would have substantially more discretion over how to allocate capitation, with predictable effects on administrative overhead and profit margins.

The framework is technically complex. The numerator-denominator definitions, the QIA criteria, the credibility adjustment, the aggregation rules, the remittance calculations, and the audit processes each have detailed technical requirements. State implementation, in Georgia through DCH's Office of Financial Management and Office of Audits and Compliance, requires ongoing oversight of CMO reporting and classification.

For Georgia families, the framework is invisible but consequential. They experience its effects through network adequacy, provider payment rates, prior authorization rigor, care coordination quality, and member service responsiveness. Higher MLR generally correlates with better experience; lower MLR signals overhead pressure that can manifest in member-facing problems.

Brevy is committed to translating these technical frameworks for the families and providers who live inside their consequences. We will continue updating this guide as Georgia's MLR implementation evolves, as CMS refines the framework, and as the 2024 Managed Care Access Final Rule interacts with MLR oversight.

Find personalized help navigating Georgia Medicaid managed care at brevy.com.

This article is for educational purposes and does not constitute legal, financial, or actuarial advice. For specific questions about Medicaid coverage, call DCH Member Services at 1-866-211-0950 or your CMO. For policy questions, the DCH Office of Financial Management is a starting point. For legal help with access or denial issues, contact Georgia Legal Services Program or Disability Rights Georgia. Brevy.com and the Brevy Care Team curate this resource to help Georgia families navigate eldercare and family health policy in America.