Medical Loss Ratio or 80/20 Rule

You may have received a letter in the mail regarding the Medical Loss Ratio or 80/20 rule included in the Affordable Care Act. See below:

Dear [Customer]:

This letter is to inform you that you will receive a refund of a portion of your health insurance premiums. This refund is required by the Affordable Care Act - the health reform law. The Affordable Care Act requires [Insurance Company] to issue a refund to you if [Insurance Company] does not spend at least 80 percent of the premiums it receives on health care services, such as doctors and hospital bills, and activities to improve health care quality, such as efforts to improve patient safety. No more than 20 percent of premiums may be spent on administrative costs such as salaries, sales, and advertising. This requirement is referred to as the "Medical Loss Ratio" standard or the "80/20 rule." The 80/20 rule in the Affordable Care Act is intended to ensure that consumers get value for their health care dollars. You can learn more about the 80/20 rule and other provisions of the health reform law at:

What the Medical Loss Ratio Rule Means to You

The Medical Loss Ratio rule is calculated on a State-by-State basis. In your State, [Insurance Company] did not meet the Medical Loss Ratio standard. In [year] [Insurance Company] spent only 79.9% of a total of [$] in premium dollars on health care and activities to improve health care quality. Since it missed the target in your State by [%] of premiums it received, [Insurance Company] must refund [%] of your health insurance premiums. We are required to provide this refund to you by [date] or apply this rebate to your premium that is due on or after [date]. Your rebate check is enclosed.

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