Understand Medical Loss Ratio requirements and calculate potential rebates. Learn how to properly distribute MLR refunds to employers and employees.
The Medical Loss Ratio measures how much of premium dollars goes toward medical claims and quality improvement versus administrative costs and profit. The Affordable Care Act (ACA) requires health insurers to meet minimum MLR thresholds.
| Market | Minimum MLR | Description |
|---|---|---|
| Individual | 80% | Individual policies purchased on or off exchange |
| Small Group | 80% | Employers with 1-50 employees (1-100 in some states) |
| Large Group | 85% | Employers with 51+ employees (101+ in some states) |
| Premium Scenario | Distribution | Notes |
|---|---|---|
| Employer pays 100% of premium | Employer keeps entire rebate | No employee distribution required |
| Employer pays 80%, employees pay 20% | 80% to employer, 20% to employees | Must distribute employee portion |
| Employer pays 50%, employees pay 50% | 50% to employer, 50% to employees | Split proportionally |
| Employees pay 100% (voluntary) | 100% to employees | Full rebate goes to employees |
Employers must distribute employee portions within 90 days of receiving the rebate. Document the distribution method and amounts.
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