Question

Case Scenario Two You had heard that the premiums for your health insurance plan may decrease as a result of the Affordable Care Act's requirement that insurance companies spend a certain amount of their premium revenue on their plans. You were interested to find out if this was true. Activity Perform an Internet search on medical loss ratios. Describe the concept and why it could decrease the cost sharing of your health insurance coverage. Responses

Answer 1

A basic financial measurement used in the Affordable Care Act to encourage health plans to provide value to enrollees. It is the percentage of the premium that is invested in medical expenses that improve health care qualityIf 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 overhead expenses, such as marketing, profits, salaries, administrative costs, and agent commissions. The Affordable Care Act sets minimum medical loss ratios for different markets, as do some state laws.

medical loss ratios are important as insurance companies have to spend that part on health related expenditure of consumers . It needs regulation so that insurance companies should stick to that and rest can be spent on administrative expenses . If they extend beyond MLR , then they need to pay rebates to policy holders.

so basically affordabe care act has set MLR so that health care quality can be improved.