The Medical Loss Ratio (MLR) provisions of the Affordable Care Act require insurers to spend at least a specified percentage of employees’ premium dollars on clinical care, rather than on administrative expenses such as executive salaries, overhead, marketing and profit. If an insurer does not spend enough on patient care to satisfy the MLR provisions, the insurer must make financial adjustments and provide rebates to customers. Health care reform sets the minimum MLR level at 85 percent for the large group market (policies covering over 50 employees) and 80 percent for the small group market. This means that administrative and other non-clinical costs can be no more than 15 or 20 percent of the insurer’s revenue. If an insurer fails to meet these standards, the insurer will be required to provide a rebate to customers beginning this year.
Rebates from insurers will differ depending on if the rebate is to a group health plan policyholder or an individual policyholder. See below for a chart of rebate dollars per state. For group health plans, the policyholder is usually (but not always) the employer sponsoring the plan. Insurer rebates to employer policyholders can be paid either in cash or in form of reduced premiums.