ACA Compliance
MLR rebate calculator
Understand Medical Loss Ratio requirements and calculate potential rebates with Planlined's free calculator. Learn how to properly distribute MLR refunds to employers and employees.
Calculator
Estimate the rebate and how it splits.
Enter the annual premium and the carrier's reported medical loss ratio. The split follows who paid the premium.
$10,000
Estimated total rebate
$7,500
Employer portion
$2,500
Employee portion
$50.00
Per enrolled employee
How this is calculated
Small group carries a 80% minimum. The shortfall is the minimum less the carrier's reported ratio, floored at zero, and the rebate is that shortfall applied to the annual premium. At or above the minimum there is no rebate.
The employee portion is the share of premium employees paid, distributed evenly across enrolled employees here. A plan whose contributions vary by tier should distribute proportionally instead. Employers must generally distribute the employee portion within 90 days of receipt. An estimate for planning, not tax or legal advice, computed in your browser.
Official MLR sources
CMS explains the 80% and 85% standards in its Medical Loss Ratio overview and requires rebate notices and payments by September 30 in its official notice instructions.
What is medical loss ratio (MLR)?
The Medical Loss Ratio measures how much of premium dollars goes toward medical claims and quality improvement versus administrative costs and profit. The Affordable Care Act (ACA) requires health insurers to meet minimum MLR thresholds.
The 80/20 rule
MLR requirements by market
| Market | Minimum MLR | Description |
|---|---|---|
| Individual | 80% | Individual policies purchased on or off exchange |
| Small Group | 80% | Employers with 1-50 employees (1-100 in some states) |
| Large Group | 85% | Employers with 51+ employees (101+ in some states) |
Rebate distribution rules
| Premium Scenario | Distribution | Notes |
|---|---|---|
| Employer pays 100% of premium | Employer keeps entire rebate | No employee distribution required |
| Employer pays 80%, employees pay 20% | 80% to employer, 20% to employees | Must distribute employee portion |
| Employer pays 50%, employees pay 50% | 50% to employer, 50% to employees | Split proportionally |
| Employees pay 100% (voluntary) | 100% to employees | Full rebate goes to employees |
Approved distribution methods
Important: 90-Day Deadline
Employers must distribute employee portions within 90 days of receiving the rebate. Document the distribution method and amounts.
Example rebate calculation
Scenario
- Total annual premium: $500,000
- Employer contribution: 75% ($375,000)
- Employee contribution: 25% ($125,000)
- Carrier's MLR: 78% (below 80% threshold)
- Shortfall: 2% of premium
Rebate distribution
- Total rebate: $10,000 (2% × $500,000)
- Employer portion: $7,500 (75%)
- Employee portion: $2,500 (25%)
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Frequently asked questions
What is Medical Loss Ratio (MLR)?
MLR is the percentage of premium dollars a health insurer spends on claims and quality improvement versus administrative costs and profits. The ACA requires insurers to meet minimum MLR standards or provide rebates.
What is the 80/20 rule for health insurance?
The 80/20 rule requires health insurers to spend at least 80% of premiums on medical claims and quality improvement (85% for large group). If they spend less, they must rebate the difference to policyholders.
How are MLR rebates distributed?
Employers receive the rebate check and must distribute it proportionally: employer-paid portions stay with employer, employee-paid portions go to employees. Distribution must occur within 90 days.
When are MLR rebates paid?
Insurers must provide any MLR rebate owed, along with the required notice, by September 30 of the year following the MLR reporting year.