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Helping Texans Compare & Understand Their Health Care Options

Rules That Health Plans Follow

Premium Responsibilities

Insurers and HMOs must spend most of the premium you pay on health care, and they must provide justification for premium increases.

Medical loss ratio.  Insurers and HMOs must spend a certain percentage of the premiums they collect on health care costs such as medical claims and health care quality improvement.  This percentage is called the medical loss ratio.

Medical Loss Ratio Requirements
Requirement Individual and
Small Employer
Some Large
Employer Plans
Percentage of Premiums Companies Must
Spend on Health Care Costs and Quality
80% 85%
Percentage of Premiums Companies Can
Spend on Other Costs (Administration, Profit)
20% 15%

What if an insurer or HMO doesn’t meet the medical loss ratio?
  If a company spends more on administrative costs or profit than allowed, it must give you a refund to make up the difference.

Find Your Company’s Medical Loss Ratio

Rate review.  All rate filings are reviewed to ensure they are fair to consumers and adequate to pay claims.  Insurers and HMOs that raise premiums more than 10 percent each year are also subject to federal review.  They must give reasons for the change and make this information available to the public.  The Federal Rate Review website helps you find rate increases.

Next Section: Compare Health Plan Quality

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Last updated: 10/06/2015