1. What is Medical Loss Ratio?

Medical Loss Ratio (MLR) is a key metric used in health insurance to measure the percentage of premium revenue spent on medical claims and quality improvement activities versus administrative costs and profits.

2. How Does the Calculator Work?

The calculator uses the MLR formula:

Where:

• \( Claims \) — Total medical claims paid (USD)
• \( QI \) — Quality improvement expenses (USD)
• \( Premiums \) — Total premium revenue collected (USD)

Explanation: The formula calculates what percentage of premium dollars are being used for actual medical care and quality improvement versus administrative overhead and profits.

3. Importance of MLR Calculation

Details: MLR is crucial for healthcare regulation under the Affordable Care Act (ACA), ensuring insurance companies spend adequate portions of premiums on patient care. Minimum MLR requirements are typically 80-85%.

4. Using the Calculator

Tips: Enter all amounts in USD. Claims and QI should be non-negative values, while premiums must be greater than zero for valid calculation.

5. Frequently Asked Questions (FAQ)

Q1: What is the ACA requirement for MLR?
A: The Affordable Care Act requires health insurers to maintain MLR of at least 80% for individual/small group markets and 85% for large group markets.

Q2: What happens if MLR is below requirements?
A: Insurers must issue rebates to policyholders for the difference between their actual MLR and the required minimum.

Q3: What expenses count as QI activities?
A: Quality improvement includes activities like disease management, wellness programs, care coordination, and health information technology.

Q4: Are there different MLR requirements by state?
A: While ACA sets federal minimums, some states may have additional or different requirements for certain insurance products.

Q5: How often should MLR be calculated?
A: MLR is typically calculated annually for regulatory reporting, but insurers may monitor it quarterly for internal management.