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Medical Loss Ratio

The Medical Loss Ratio (MLR) is one of the Affordable Care Act (ACA) provisions designed to provide better value to consumers and increase transparency. It limits the portion of premium dollars health insurance companies may spend on administration, marketing, and profits.

The provision took effect for coverage purchased in 2011 and requires health insurance companies to:

  • Report annually the proportion of premium dollars spent on health care costs and the quality of care.
  • Pay rebates to policyholders if the share of premiums spent on clinical services and quality is less than:
    • 80% for plans in the individual and small group markets.
    • 85% for plans in the large group markets.

MLR is calculated based on a company's entire book of business, not by a specific plan or group.