Medical Loss Ratio (MLR)

A basic financial measurement of how much of the premium is used to pay for medical care versus overhead. . 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 for overhead expenses, such as administrative costs, salaries, marketing and agent commissions, and/or retaining some as profit. Federal law sets minimum medical loss ratios for different markets, as do some state laws.

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