Under the Affordable Care Act, what is the minimum percentage of premiums that must be spent on actual medical expenses and health care claims for an individual health plan?

• A. 70 percent
• B. 75 percent
• C. 85 percent
• D. 80 percent

Answer: (D)

Under the ACA, insurers must allocate a large share of premium dollars to actual medical care and to initiatives that improve health care quality. For individual health plans, at least 80% of premium dollars must go toward medical care and quality improvement. The remaining portion covers things like administrative costs, marketing, and profits. If an insurer doesn’t meet that 80% threshold, they’re required to issue rebates to policyholders. It’s worth noting that 85% applies to large-group plans, not individual plans, which is why 80% is the correct figure for individuals.