When employers evaluate their group health insurance options, they often focus on premiums, deductibles, copays, and provider networks. Another important factor to understand is Medical Loss Ratio (MLR). While the term may sound complicated, MLR is designed to provide greater transparency about how health insurance companies use premium dollars.
What Is Medical Loss Ratio?
Medical Loss Ratio measures the percentage of health insurance premium dollars that an insurer spends on health care services and activities that improve the quality of care, rather than on administrative expenses, marketing, and other costs.
The Affordable Care Act (ACA) established minimum MLR standards for health plans. Under these requirements, insurers generally must spend at least:
80% of premium dollars on health care and quality improvement for Individual and Small Group plans
85% for Large Group plans
These requirements are commonly referred to as the “80/20” and “85/15” rules.
The goal is straightforward: A significant portion of the money paid in premiums should go toward providing health care and improving the quality of that care.
Why Does MLR Matter to Employers?
MLR requirements can give employers and employees greater insight into how premium dollars are being used. If an insurer does not meet the applicable MLR standard, it may be required to provide rebates to policyholders.
For employers offering group health benefits, understanding MLR can also be part of evaluating the overall performance of your health plan. However, MLR is only one piece of the puzzle. You should also consider factors such as plan design, employee needs, provider networks, prescription drug coverage, costs, and the insurer’s overall service.
What Happened With California Plans in 2025?
California’s 2025 MLR results provide a useful example. Health Net met or exceeded all required MLR thresholds for the 2025 plan year.
For Individual and Family Plans (IFP), both HMO and PPO plans met the applicable MLR standards. Health Net’s Small Group (SBG) HMO and PPO plans also met the required standards. The same was true for its Large Group (LRG) HMO and PPO plans.
Because the applicable thresholds were met or exceeded, subscribers and employer groups in these market segments will not receive MLR rebates for the 2025 plan year.
Get Help Understanding Your Group Health Plan
MLR is just one of many factors you should consider when managing your group health benefits. Understanding how your plan works, what your employees need, and how your options compare can help you make more informed benefits decisions.
If you have questions about Medical Loss Ratio, MLR rebates, or your company’s group health insurance options, call us at Bay Area Health Insurance. We can help you better understand your group plan and explore benefit solutions that make sense for your business and your employees.
