The Medical Loss Ratio (MLR) is the share of premium revenue an insurer spends on clinical services and on activities that improve health care quality. Think of it as how many cents of each premium dollar go to care. In the ratio, premium revenue excludes taxes and licensing or regulatory fees. Overhead such as commissions and advertising is what the ratio limits.

Minimum MLR (CDI outline): - Individual plans: 80% - Group plans: 85% Current §10112.25(b) sets 85% for large group and 80% for small group and individual. On the exam, use the outline's 85% for group plans.

Failing the test: an insurer that misses the MLR in a calendar year for all plans in a market segment (individual or group) must refund excess premiums to consumers enrolled in plans in that segment. California law requires a pro rata rebate no later than September 30 of the following year. Each market is tested on its own; a better ratio in another market does not cure the shortfall.

Example: an individual-market MLR of 76% is 4 points below 80%. The rebate is based on that 4-point shortfall applied to premium revenue after taxes and fees, not on all premium collected.