The minimum is 80 percent for small group and 85 percent for large group.
Insurers in the individual and small group markets must meet an 80 percent minimum. Large group insurers must meet 85 percent.
How the 80 and 85 percent thresholds work
The medical loss ratio thresholds are minimum percentages of premium that an insurer must spend on claims and quality improvement. For the individual and small group markets the minimum is 80 percent. For the large group market it is 85 percent. If the insurer’s calculated ratio falls below the threshold for a state and market, it owes rebates for the difference.
The percentages describe the insurer’s overall results, not the results of a single employer group. A group whose own claims are 60 percent of premium does not receive a rebate because of that. A rebate is paid only when the insurer’s combined results for that market in the state fall below the minimum.
Several adjustments go into the calculation. Taxes and certain fees are taken out of premium, quality improvement spending is counted with claims, and the figure is a three-year average, which smooths a single unusual year. Smaller insurers may be given credibility adjustments.
For employers the practical points are these: a rebate is an uncommon event for any one group, it is not a pricing guarantee, and it can arrive long after the plan year in question. If one does arrive, how it is used depends on who paid the premium.
What to decide and where it connects
The MLR Rule
What insurers must spend.
Using a Rebate
What employers do with one.
Rebate Guide
The rebate rule explained.
Questions about this topic
What are the MLR thresholds?
80 percent for individual and small group, and 85 percent for large group.
Who defines large group?
It depends on the rules that apply. Confirm the definition for your state.
How is the ratio measured?
Over a multi-year period, using a formula set by regulators.
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.
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