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Understanding Medical Loss Ratio

Medical Loss Ratio (MLR) is the percent of premium an insurer spends on claims and expenses that improve health care quality.


Under the Affordable Care Act, insurers and HMOs have to pay rebates to policyholders if they don’t meet an MLR standard of at least 80% (for individuals and small groups) or 85% (for large groups). If your insurance company doesn’t meet its 80/20 targets for the year, you’ll get back some of the premium that you paid. You may see the rebate in a number of ways:


  • A rebate check in the mail
  • A lump-sum deposit into the same account that was used to pay the premium, if you paid by credit card or debit card
  • A direct reduction in your future premium
  • Your employer may also use one of the above rebate methods, or apply the rebate in a way that benefits employees

If you or your employer receives a rebate, your insurance company must notify you by August 1.


If you have an individual insurance policy, you’ll get the rebate directly from your insurance company.


For small group and large group plans, the rebate is usually paid to the employer.


Note: The MLR rebate rules don’t apply when an insurance company has fewer than 1000 enrollees in a particular state or market.


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