ACA Facts: Medical Loss Ratio

December 11, 2012

Medical Loss Ratio

Under the ACA, consumers will receive more value for their premium dollar.  The medical loss ratio, a financial measurement under the law, requires insurance companies to spend a large percentage of premium dollars (80-85%) on medical care and health care quality improvement, as opposed to overhead costs.  For instance, in a MLR of 80:20, 80% of the premium charged is used by the insurer to pay for direct services that enhance a customer's quality of care, while the other 20% is used to pay for overhead costs such as marketing, salaries, and administrative costs.