Insurers must spend a minimum share of premium on care and quality.
Under the ACA, insurers must spend a minimum share of premium on claims and quality improvement or pay rebates to policyholders.
What the rule requires, and what it does not
The ACA medical loss ratio rule sets a floor on how much of each premium dollar an insurer spends on medical claims and activities that improve quality. If an insurer spends less than the floor, it owes rebates to the policyholders. The standard is 80 percent for the individual and small group markets and 85 percent for the large group market, with the market sizes defined by the rules that apply in your state.
The calculation is made at the insurer level, by state and market segment, and it uses a three-year average rather than a single year. Rebates are generally paid once a year. Because the test looks at the insurer’s whole block of business in a state, one employer’s favorable or unfavorable claims year does not change whether a rebate is owed.
The rule applies to insurers, not to self-funded plans. A self-funded employer pays claims directly and has no insurer premium to measure, so there is no MLR rebate. A level-funded plan is usually built on a self-funded structure, so the same applies.
What the rule does not do is cap your renewal or promise that the carrier’s pricing is competitive. A carrier can meet the MLR floor and still be expensive for your group. We use the rule as background, and we test the renewal against your own claims experience and the market.
What to decide and where it connects
Thresholds
The 80 and 85 percent minimums.
Using a Rebate
Plan-asset and notice questions.
Rebate Guide
The rebate rule explained.
Questions about this topic
What is the MLR rule?
A federal rule requiring insurers to spend a minimum share of premium on care and quality.
Who gets a rebate?
Policyholders of plans that fall below the minimum, including employers.
Does it apply to self-funded plans?
No. It applies to insured coverage.
Ready? Send us your renewal, or talk it through with someone first. General information, not legal or tax advice.
Where these details come from.
CMS: Medical Loss Ratio: Federal MLR rule and rebate guidance.
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
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