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Why is it called “medical LOSS ratio” when it defines what insurance is supposed to cover?

Kaiser Health News columnist Michelle Andrews was interviewed in this video, explaining what “medical loss ratio” means to consumers.

Medical loss ratio is that intriguing term used for what insurers actually have to spend to cover health care – not what goes to administrative costs, marketing, salaries, profits, etc.

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Please note, comments are no longer published through this website. All previously made comments are still archived and available for viewing through select posts.

Gregory D. Pawelski

July 15, 2011 at 10:44 am

Is there something wrong with making private insurance companies spend at least 80% of the revenues they receive in premiums from individual and small group customers (large group customers at least 85%) on medical claims and activities that improve the quality of care?

Susan Fitzgerald

July 28, 2011 at 11:12 am

“Medical loss ratio” is a clumsy accounting term that obscures what it really is: “medical claims ratio.”
The reason that MLR is usually lower for individuals and small groups is just because you don’t get the price break on volume. It will cost more to administer policies and claims for 20,000 individuals than one employer group with 20,000 workers.