MLR

1) Important financial metric used to gauge the quality of health insurers, introduced in the Affordable Care Act (ACA). It stands for Medical Loss Ratio

2) Health Insurers work on a simple model. A major component of their revenue is premiums while the major component of their costs is actually providing the promised healthcare to its customers.

3) ACA mandates that health insurers must spend 80-85% of its premiums on actual medical and health care each financial year. These firms have made their spending records publicly available.

4) The 80-85% ratio is known as the medical loss ratio (MLR). For example, if an insurer collects $100 in premiums, spends $50 in marketing and administrative costs and spends $20 in actual health services, then its medical loss ratio would be = (20/100)*100 = 20%. Note that expenditure only on health services is counted in the MLR computation.

5) If the health insurance firm fails to satisfy the MLR requirement, then it is required to provide rebates to its customers.