FAQs_Health_Insurance_Rates > How companies determine rates 1B
Is there a limit on the amount of profit a company can make?
Yes. The Affordable Care Act requires companies to spend a specific percentage of the premium on health care services and healthcare quality improvement activities. This amount may not include administrative expenses, such as overhead, marketing and salaries. The law requires that in the large group market (offered by an employer or through a membership organization), 85% of the premium must be spent on direct medical care and quality improvement. In the individual market (purchased by an individual or family) and the small employer market (purchased by an employer with at least two but no more than fifty eligible employees), 80% must be spent on direct medical care and quality improvement. Generally, when an insurance company exceeds this percentage, it must provide enrollees with rebates of the excess premium collected. For more information about the Affordable Care Act’s requirements, visit www.healthcare.gov.