Where Might Premiums Be Heading?

In an effort to provide consumers with high-value health plans, the medical loss ratio (MLR) provisions of the Affordable Care Act (ACA) require insurers to spend at least 80 percent of individual premium costs on patient care and quality improvement efforts.

The Issue:

Prior to the ACA’s 2010 implementation, the average MLR for all insurers in 29 states failed to hit 80 percent. By 2014, every state had an average MLR at or above that figure. In a set of briefs, experts analyze how this will affect consumer premiums.

Key Findings

  • MLRs in the individual market have risen dramatically since the adoption of the ACA, with insurers spending an average of 92 percent of individual health plan premiums on patient care or quality improvement in 2014, leaving 8 percent for administrative costs and profits.

  • Experts say the rise in the national average MLR is a significant change from pre-health reform figures, and could signal changes in premiums for 2016.

  • In 10 states and the District of Columbia last year, the average MLR was more than 100 percent—meaning that insurers spent more on medical care, on average, than they brought in from premiums.  


The ACA-mandated MLR levels are designed to ensure value in the individual health plan market while steadying the rise and fall of premium costs. While this may a long-term result, consumers could experience higher-than-normal premium increases in the short term as insurers become more experienced with the new regulations.

About the Grantee

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. For more information specific to the Urban Institute’s Health Policy Center, its staff, and its recent research, visit http://www.urban.org/policy-centers/health-policy-center.