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What is the Medical Loss Ratio of the Affordable Care Act?
Health Payer Intelligence July 7, 2020
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.
The medical loss ratio is a financial standard that plans on the Affordable Care Act exchanges must uphold. It sets the baseline for how much of payer revenue must go directly toward covering consumer claims.
For example, a medical loss ratio of 80 percent means that payers have to apply 80 cents out of every premium dollar toward medical claims. This ensures that payers are not contributing an exorbitant amount of their revenue to their own profit or administrative costs.
Importantly, the Affordable Care Act’s medical loss ratio formula differs from the...
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