Patient Protection and Affordable Care Act – Medical Loss Ratio

The Patient Protection and Affordable Care Act (PPACA) included regulation concerning medical loss ratios (MLR). If insurers fall below a specific MLR limit – 80 percent in individual and small group and 85 percent MLR in large group – they are required by law to refund policy holders.

The PPACA medical loss ratio is unique and is defined as the sum of incurred claims plus expenses to improve health care quality divided by earned premiums minus federal and state taxes and licensing fees. The calculation is done yearly starting Jan. 1 and going through Dec. 31.

In 2011, Providence Health Plan met the MLR spend requirements established by The Affordable Care Act requirements. This means that we have demonstrated fiscal responsibility and therefore will not be required to issue member rebates.

The following notice will be available to members on myProvidence on Aug. 1:

Medical Loss Ratio Information

The Affordable Care Act requires health insurers in the individual and small group markets to spend at least 80 percent of the premiums they receive on health care services and activities to improve health care quality (in the large group market, this amount is 85 percent). This is referred to as the Medical Loss Ratio (MLR) rule or the 80/20 rule. If a health insurer does not spend at least 80 percent of the premiums it receives on health care services and activities to improve health care quality, the insurer must rebate the difference.

A health insurer’s Medical Loss Ratio is determined separately for each State’s individual, small group and large group markets in which the health insurer offers health insurance.k In some States, health insurers must meet a higher or lower Medical Loss Ratio. No later than August 1, 2012, health insurers must send any rebates due for 2011 and information to employers and individuals regarding any rebates due for 2011.

You are receiving this notice because your health insurer had a Medical Loss Ratio for 2011 that met or exceeded the required Medical Loss Ratio. For more information on Medical Loss Ratio and your health insurer’s Medical Loss Ratio, visit

Additional information about Medical Loss Ratio can be found by reading the Frequently Asked Questions (PDF).