The medical loss ratio (MLR) provision implemented by section 1001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) continues to ensure that health coverage offers high value in exchange for the premiums paid by consumers. In 2015, four states had an average refund per family greater than $300 per family individual market. Overall, this rule, known as the 80/20 rule, has resulted in almost $2.8 billion in total rebates (CCIIO Report , November 18, 2016).
MLR provision. The ACA’s 80/20 rule requires insurers in both individual and small group markets to spend at least 80 percent of consumers’ premiums on health care or quality improvement activities. For the large group market, this amount increases to 85 percent. Insurers that fail to meet this standard must pay rebates to enrollees in order to refund the difference. The amounts are based on total premium dollars, not on the premiums and claims for any specific individual.
Reimbursements are provided by check, reimbursement to the account, or a reduction in future premiums. For employer plans, the rebate is sent to the employer, who must then provide the rebates to employees. In 2015, about $397 million in rebates were issued to 2.8 million families. The highest share, $154 million, went to the small group market, while the average refund was the highest in the large group market at $146.
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