The Unintended Consequences Of The ACA's Medical Loss Ratio Requirement

The Affordable Care Act (ACA) introduced the medical loss ratio (MLR) requirement to the individual, small group, and large group markets with the stated goal of improving the value and affordability of health insurance benefits by capping insurers' profit margins and administrative costs. The requirement requires insurers to spend a large percentage of premium revenue on medical services—80 percent for individual and small group plans, and 85 percent for large group plans—thereby limiting administrative costs and profits to the remaining 15-20 percent.

While the MLR requirement applies to fully insured plans in the individual, small group, and large group markets, its most visible impact has been in the individual market. From 2011 to 2021, after adjusting for medical inflation, median annual premiums per enrollee in the ACA individual market increased 59 percent (from $3,574 to $5,683), even though subsidized premiums seem affordable to the vast majority of consumers insured in this market. In 2025, approximately 24 million individuals obtained health insurance through exchanges, with four out of five (19 million) enrollees' monthly net premiums at $10 or less after subsidies. These enrollees received an estimated $98 billion and $107 billion in subsidies in the form of premium payments to insurance companies in 2024 and 2025, respectively.

If an insurer's MLR falls below the required thresholds, the ACA requires refunds to be paid to enrollees. These refunds have totaled hundreds of millions of dollars—$192.2 million to 2.7 million enrollees in 2012 and $491.0 million to 3.6 million enrollees in 2023. Yet, in many cases, these payments go to enrollees whose premiums were already almost entirely subsidized by the federal government, even though the government was the party that paid the extra premium.

After more than a decade, there is little evidence that the MLR requirement has promoted premium affordability or constrained insurer profits as intended; instead, the MLR drives higher premiums and higher medical care spending and presents other unintended consequences that warrant attention. In this Forefront article, we discuss how the MLR statute has led to these negative outcomes and propose policy solutions.