Definition of Medical Loss Ratio
How Medical Loss Ratio Works
What Medical Loss Ratio Means for You
Definition of Medical Loss Ratio
Medical Loss Ratio (MLR) is a calculation that refers to the amount of net premiums that a health insurance provider pays to settle claims.
The Medical Loss Ratio (MLR) is calculated by dividing the costs of claims and the costs of improving the quality of healthcare provided by the health insurance provider by the net premiums received.
Insurance companies are required to achieve a Medical Loss Ratio (MLR) of 80% for individual and family plans and small groups, and a rate of 85% for large group plans.
How Medical Loss Ratio Works
The minimum Medical Loss Ratio requirements aim to hold insurance providers accountable for how they spend health insurance premiums and keep healthcare costs low.
Before the Affordable Care Act (ACA), many states had individual requirements for the Medical Loss Ratio, but these were defined more simply: claims paid divided by premiums received.
You can look up the Medical Loss Ratio for your insurance provider to see if you will receive a cash refund or ensure that it meets the minimum requirements.
What Medical Loss Ratio Means for You
If your health insurance provider does not meet the required minimum Medical Loss Ratio, you may receive a cash refund or your future premiums may be reduced.
If you or your employer qualifies for a cash refund, the insurance company must inform you by August 1. If you have an individual insurance policy, you will receive your refund directly, but if your plan is employer-sponsored, your employer is likely to receive the refund instead of you.
Your employer may use part of the refund in one of the ways mentioned above, or use the funds to improve the healthcare plan that benefits all employees.
Source: https://www.thebalancemoney.com/what-is-medical-loss-ratio-5198242
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