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.

« Back to Glossary Index
This entry was posted in . Bookmark the permalink.