Medical Loss Ratio

Overview HCAN’s Work More Resources


The medical loss ratio (MLR) measures the percentage of your health insurance premium that is spent on actual medical care, as opposed to overhead expenses such as claims administration, marketing and sales costs, CEO compensation, profits and lobbying. It is one of the most significant consumer protections in the law, holding insurance companies accountable and bringing costs down. The MLR is an important tool to find out if your health plan is a good value or to compare different plans.

Before the Affordable Care Act (ACA), many health plans would spend more than 30% of premium dollars on administrative costs. Beginning in 2011, the ACA requires plans in the individual and small group markets to spend at least 80% of premiums on medical care; large group plans must spend 85%. Plans that don’t meet this threshold are required to rebate the difference.

The MLR means:

  • Consumer rebates: HHS estimates that 9 million people could be eligible for $1.4 billion in rebates in 2011 alone. The National Association of Insurance Commissioners (NAIC) and private analysts estimate rebates of $2 billion.
  • Lower premiums: Other health plans have reduced their premiums in order to avoid paying rebates later. For instance, some Aetna customers in Connecticut saw premiums fall by up to 19%.

HCAN’s Work on Medical Loss Ratio

We organize at the grassroots around all of our priority issues in order to move policymakers and build public support. Our work on Capitol Hill is also key to our effort; please see below for examples of that work and relevant documents.

HCAN is working to protect the MLR rule to add value to health insurance bought by consumers and lay bare the industry’s dubious claims about how premiums are spent. Our work includes:

Working Against Attempts to Block MLR Implementation in the States
Some states have tried to prevent the MLR from going into effect by seeking an “adjustment” from HHS, a way of getting around the rule. See the full list of adjustment requests here.

HCAN state partners, HCAN national, and hundreds of national and state-based consumer groups have submitted comments to HHS urging the agency to adhere to the MLR threshold required by the ACA and rule to deny the requested MLR waivers that would deny consumers millions in rebates.

The following are HCAN state partners’ public comments submitted to HHS opposing their state’s requested MLR waivers:

Comments from Florida CHAIN, Organize Now, and other consumer groups (10/27/11)

Comments from Iowa Citizen Action, Iowa Main Street Alliance, and other
consumer groups

Comments from Progressive Leadership Alliance of Nevada, HCAN national,
and other consumer groups (5/5/11)

Comments from NH Citizens Alliance and other consumer groups (3/24/11).

Comments from Action NC (1/20/12)

Comments from and other consumer groups

Comments from Citizen Action of Wisconsin

The following are comments submitted by HCAN national to HHS opposing requests for MLR waivers made by Florida, Indiana and Nevada:

Comments submitted by HCAN national to HHS opposing Florida’s adjustment request (10/26/11)

Comments submitted by HCAN national to HHS opposing Florida’s request for  reconsideration of the state’s denied adjustment request (1/17/12)

Comments submitted by HCAN national to HHS opposing Indiana’s adjustment
request (10/12/11)

Comments submitted by HCAN national, Progressive Leadership Alliance of Nevada, and other consumer groups to HHS opposing Nevada’s adjustment request (5/5/11)

Working Against Attempts in Congress to Repeal the MLR
Republicans want to repeal the MLR and deny consumers at least $1.4 billion in rebates from insurance companies.

Nearly 50 consumer groups including HCAN sent a letter to the House Energy & Commerce Committee opposing H.R. 2077, a bill to repeal the MLR (9/15/11)

Working Against Attempts to Undercut the MLR Formula to Reduce Rebates
Insurance agents and brokers are paid by insurance companies to sell insurance coverage to individuals, families and businesses. Their fees and commissions are administrative expenses, and some insurance plans have reduced them, citing the new MLR as the reason. Agents and brokers have been asking Congress to change the law to create a special exemption for their fees, allowing insurers to continue taking as much as 30% or 40% of premiums for expenses unrelated to health care. Changing the treatment of agent and broker commissions would eviscerate the MLR formula, deny consumers rebates, and ruin the MLR’s ability to constrain premium costs. HCAN opposes changes to the MLR that ignore or deliberately misclassify significant expenses.

HCAN opposes H.R.1206 and similar measures, which would raise premiums and cancel rebates for millions of consumers by exempting all sales costs from the calculation of administrative expenses.

Summary of H.R.1206

FAQ on H.R.1206

Letter to Congress opposing H.R.1206 (3/28/11)

The ACA requires the National Association of Insurance Commissioners (NAIC) to develop recommendations on the implementation of the MLR. The HHS regulation is nearly identical to those recommendations, including treating agent and broker commissions as administrative expenses. However, activist insurance commissioners and lobbyists for the agents and brokers have made several attempts to change this recommendation. In a divided and contentious vote in November 2011, the NAIC asked Congress or HHS to prevent cuts to agent and broker commissions but did not endorse H.R.1206.

Letter from consumer groups to Congress opposing NAIC resolution on changing the MLR formula (12/5/11)

Letter from consumer groups to the NAIC on Task Force report on professional health insurance advisors (6/28/11)

Letter from consumer groups to the NAIC opposing H.R.1206 (3/14/11)

Commenting on HHS Regulations
HHS has issued regulations to implement the MLR provision.

HCAN and consumer groups comment on the final rule (1/6/12)

HCAN and partners comment on the interim final rule (1/31/11)

More Resources

In addition to the above links to resources, please see below.