Georgia Navigator Practice Exam

What is the name of the ACA provision that requires health plans to allocate a specific percentage of premium dollars to medical claims?

1. Risk adjustment

2. Consumer assistance

3. Medical Loss Ratio (MLR)

4. Emergency care standard

The correct answer is: Medical Loss Ratio (MLR)

The provision of the Affordable Care Act (ACA) that mandates health plans to allocate a designated percentage of premium dollars to medical claims is known as the Medical Loss Ratio (MLR). This requirement ensures that a significant portion of the premium income that health insurance companies receive is used directly for providing medical services and improving health care quality, rather than for administrative costs, marketing, or profits. By setting this standard, the ACA aims to protect consumers by ensuring that they receive value for their premiums. Specifically, insurance companies must spend at least 80% of premium dollars on medical care and quality improvement for individual and small group plans, and at least 85% for large group plans. If insurers fail to meet these thresholds, they are required to provide rebates to policyholders. This keeps insurance companies accountable for how they use the funds collected through premiums, ultimately benefiting consumers by promoting efficient healthcare spending.