What is the Minimum Loss Ratio for Individual Medical Health Insurance? « Health Insurance Advisory

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new healthcare reform lawThe new healthcare law, called the Patient Protection and Affordable Care Act (PPACA), represents comprehensive healthcare reform legislation signed into law on March 23, 2010. It contains numerous provisions designed to protect consumers and promote low cost medical insurance, including many new taxes to pay for the cost.

In this section of the site, you can also obtain the following information specific to your state: available medical insurance options, efforts to regulate medical insurance premiums, healthcare, the individual medical insurance marketplace and the new healthcare law.

Our objective is to help Americans make sense of the new healthcare law by explaining key provisions in plain English and assisting individuals, families and the self-employed in using this information to find and secure affordable medical insurance.

What is the Minimum Loss Ratio for Individual Medical Health Insurance?

Author: Administrator | Jan 14 2012 | General Provisions - New Healthcare Law

You may have heard about the Minimum Loss Ratio (MLR) for individual medical health insurance, but what is it and how does it impact you? Under the new healthcare law, called the Affordable Care Act, special rules were established that regulate how health insurance companies can spend every health plan premium dollar.  Effective January 1, 2011, health insurers are required to spend at least 80 percent on clinical services (medical claims) and activities that improve healthcare quality of enrollees covered under individual medical health insurance.

Prior to the new healthcare law, most states did not regulate how health insurance companies spent health plan premiums they collected from their members. Historically, many health insurers spent less than 80 percent on the payment of healthcare claims, as  60% to 75% was more commonplace.  Since one of the primary objectives of the Affordable Care Act is to promote low cost medical insurance, the MLR is an important provision to help achieve that goal.

Since the Minimum Loss Ratio has gone into effect, many health insurers have had to cut their expenses in order to allocate more of the health plan premium toward the payment of medical claims. This has also resulted in health insurance companies reducing their rates so that they can meet the 80% MLR requirement. Many consumers have benefited, as the rates for individual medical health insurance have been reduced in many markets around the country.

If a health insurer spends less than 80% on the payment of medical claims and healthcare quality improvement, then they are required to refund (also referred to as “rebate”) excess monies to its customers.  This has resulted in several health insurers companies refunding individual medical health insurance premiums to policyholders or declaring rebates that will be paid in the near future.

While many consumers will see lower premiums for individual medical health insurance in the short-run, the real question is can the new healthcare law keep rates lower over the long haul? While the Minimum Loss Ratio addresses how a health insurer must spend each premium dollar, medical insurance gets more expensive every year because healthcare costs continue to skyrocket out of sight.  Until the inflationary drivers of healthcare are dealt with, the goal of low cost medical insurance for all Americans will not be reachable.  Some of the major factors that influence the price of healthcare goods and services are:

  • lifestyle abuses
  • defensive medicine practiced by healthcare providers
  • an aging population
  • medical malpractice
  • over-utilization of healthcare services
  • the uninsured and under-insured population

If your medical insurance plan has become too expensive, now is a good time to shop and compare prices.  We can help. Our online health insurance quotes will allow you to compare side-by-side the premiums and coverage levels of top rated health insurance companies in your area.  You can even apply online too. In addition to helping you save money on individual medical health insurance, you can also secure an individual dental insurance plan. Get started today by calling us at 800-403-8511.

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