Medical loss ratio (MLR) is a financial metric used in the Affordable Care Act of 2010. The Medical Loss Ratio requirement says that health insurance companies have to spend at least 80% of their premium income (excluding taxes and fees) from individual and small group policies and 85% of premiums from large groups on medical claims and health care quality improvements. The Patient Protection and Affordable Care Act (ACA) requires health insurance companies to spend a certain percentage of premium on providing medical benefits and quality-improvement activities. What is Medical Loss Ratio (MLR)? The medical loss ratio – also known as the 80/20 rule – means that insurers have to disclose where they’re spending plan holder premium dollars. Medical loss ratio (MLR) is the amount of premium dollars that an insurance company spends on health care quality rather than marketing, salaries, and various administrative costs. Medical care ratio (MCR), also known as medical cost ratio, medical loss ratio, and medical benefit ratio, is a metric used in managed health care and health insurance to measure medical costs as a percentage of premium revenues. It is generally used in health insurance and is stated as the ratio of healthcare claims paid to premiums received. The medical loss ratio—also known as the 80/20 rule, the medical loss trend, and the medical cost ratio—aims to ensure that payers invest in member quality of care. This ratio shows how much of every dollar spent goes to benefit the person with insurance. Insurers have what they call "acceptable loss ratios." The 80/20 rule is sometimes known as Medical Loss Ratio, or MLR. It is a type of loss ratio, which is a common metric in insurance measuring the percentage of premiums paid out in claims rather than expenses and profit provision. For example, one insurer's workers compensation acceptable loss ratio might be 65 percent, meaning that, when it adds its expense load, the combined loss ratio will be below 100 percent. #1 – Medical Loss Ratio. If they spend less than 80 percent (less than 85 percent for large group plans) on providing medical care, they must rebate the excess dollars back to consumers each year. MLR is a basic financial measurement used in the Affordable Care Act (ACA) to encourage health plans to provide value to members. As acceptable loss ratio is one that is just short of producing an unprofitable account. Medical Loss Ratio FAQ Definition and Importance. Medical loss ratio is the ratio of the value of medical services provided to the amount of the premiums paid to a health insurance company. In early August 2012, some U.S. employers with fully insured employee health benefit plans received a medical loss ratio (MLR) rebate. The Medical Loss Ratio (or MLR) requirement of the Affordable Care Act (ACA) limits the portion of premium dollars health insurers may use for administration, marketing, and profits. Health insurers in the united states are mandated to spend 80% of the premiums received towards claims and activities that improve the quality of care. Medical Loss Ratio Rebates. If an insurance company uses 80 cents out of every premium dollar to pay for your medical claims and activities that improve the quality of care, the company has a Medical Loss Ratio of 80%. Under the Health Care Reform law, HMOs and insurers must now pay medical loss ratio rebates to policyholders if they do not meet MLR standards. It refers to the percentage of premiums that health insurers spend on claims and other expenses that improve quality of health.