Why it matters at renewal
MLR is often confused with your group's own loss ratio. It's calculated across a carrier's whole market in a state, averaged over three years, so it says little about your renewal. It does explain the occasional rebate check.
Rebates are real money, but they aren't predictable. Insurers estimated about $759 million in MLR rebates for 2026, down from $1.6 billion in 2025 (KFF). Rebates or notices go out by the end of September.
Worked example
A carrier's large group business in one state. One year is shown for simplicity; the real test averages three.
| Step | Value |
|---|---|
| Large group premium | $100,000,000 |
| Less taxes and fees | −$3,000,000 |
| Adjusted premium | $97,000,000 |
| Claims + quality improvement | $79,000,000 |
| MLR (79 ÷ 97) | 81.4%, below the 85% minimum |
| Rebate owed (85% × $97M − $79M) | $3,450,000 |
Rebates are shared among that market's policyholders roughly in proportion to premium. A 180-member group paying $1,512,000 a year has 1.5% of the premium, so its share is about $52,164.
| Our group | Amount |
|---|---|
| Share of the rebate | $52,164 |
| Employee share (employees pay 20% of premium) | $10,433 |
| Employer share | $41,731 |
The employee share is generally a plan asset under ERISA and has to be used for participants, typically within three months, as a premium reduction, refund or benefit enhancement. The Department of Labor's Technical Release 2011-04 covers the rules. This isn't legal advice; check the handling with your broker or benefits counsel.
Read the transcript
This group's own loss ratio was ninety percent. It still got a rebate check for fifty-two thousand dollars. That's the medical loss ratio at work.
The medical loss ratio is an ACA rule for insured plans. Carriers must spend at least eighty-five percent of large group premium on care and quality improvement. Eighty percent for small groups. If they fall short, they pay rebates.
But it's measured across the carrier's whole market in your state, averaged over three years. Not your group.
Say a carrier collected a hundred million dollars in large group premium. Take out three million in taxes and fees. Claims and quality spending came to seventy-nine million. That's eighty-one point four percent, short of eighty-five. It owes three point four five million back.
Rebates follow premium. This group paid one point five million, so its share is about fifty-two thousand. The part tied to employee contributions has to benefit employees, usually within three months.
So ask your broker three things. Is this our loss ratio or the carrier's MLR? Has our carrier paid MLR rebates in our state? And how do we handle the employee share? Find out more at actuariallysound dot com.
Common misunderstandings
Questions to ask your carrier or broker
- Is this our group loss ratio or the carrier's MLR?
- Has our carrier paid MLR rebates in our state and market recently?
- If we get a rebate, how must the employee share be handled?