Question

Topic: Medical Loss Ratio provision of the ACA.

Question: Please describe/explain Medical Loss Ratio (e.g., how does it relate to the ACA and medical insurance; how does it impact healthcare consumers/medical insurance companies)?

Answer 1

Answer: Medical Loss Ratio(MLR) is a basic financial measurement used in the Affordable Care Act to encourage health plans to provide value to enrollees.It is the percent of premiums an insurance company spends on claims and expenses that improve health care quality.If an insurer uses 80 cents out of every premium dollar to pay its customers medical claims and activities that improve the quality of care,the company has a medical loss ratio of 80% .

A medical loss ratio of 80% indicates that the insurer is using the remaining 20 cents of each premium dollar to pay overhead expenses,such as marketing,profits,salaries,administrative costs,and agent commission.The Affordable Care Acts sets minimum medical loss ratios for different markets,as do some state laws.

The impact of MLR in Affordable Care Act protects consumers by capping insurers profits and overhead,however,insurers are earning substantial profits while the individual market is related by regulatory uncertainty and change.