The medical loss ratio (MLR) is the percentage of premium that health insurers spend on medical care and quality improvement activities. The Affordable Care Act requires health insurers to disclose through MLR reporting how much is spent on health care and how much is spent on administrative costs, such as sales and marketing. The federal Department of Health and Human Services (HHS) has enforced minimum MLR standards since 2011. The standards are intended to help consumers by:
- Providing transparency. Insurance companies must publicly report how premium dollars are spent.
- Ensuring value for the premium dollar. The percentage of premium dollars that may be spent on overhead must not exceed 20% in the individual and small group markets and 15% in the large group market.
- Providing rebates. Insurance companies exceeding the MLR standard must provide rebates to their enrollees. The rebate may be provided directly to the enrollee or indirectly through their employer.
A series of quick reference guides, data files, and two fact sheets about the MLR are available as Document Downloads.