Medical loss ratio.
In plain English
Every dollar you pay in health insurance premiums gets split two ways. Most of it pays for medical care: doctor visits, hospital stays, prescriptions, and the like. The rest covers the insurer's administration, marketing, and profit. The medical loss ratio is that first share, the percentage of premiums spent on care. An 85% ratio means 85 cents of every premium dollar went to care and 15 cents stayed with the insurer. A lower ratio means the insurer kept more of your premium, which is why a falling ratio often shows up as higher insurer profit. Federal law sets a floor: under the Affordable Care Act, an insurer must spend at least 80% of premiums on care for individual and small-group plans, or 85% for large-group plans, and refund the difference if it falls short. Some insurers call this same number the medical care ratio.
01Why it matters
When a health insurer's profit jumps on an earnings day, a lower medical loss ratio is often the reason: it spent less of each premium dollar on care. For you, the ratio and the legal floor under it are what force at least a set share of your premium back into care, or back to you as a rebate.
02The math, step by step
Say an insurer collects $100 in premiums and runs an 85% medical loss ratio. About $85 paid for medical care, and $15 covered administration, marketing, and profit. If the ratio falls to 80%, only $80 goes to care and $20 stays with the insurer. Across a large insurer's millions of members, that five-point shift adds up to real money.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
The ratio shows how premium dollars were split, not how good the care was. A high ratio can simply mean members were sicker and used more care that year, not that the plan is better.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.