Medical Loss Ratio: What does it mean?

If you’re an employer, you probably saw a rise in healthcare costs this year, but the rise for 2012 is lower than it has been. One reason may be the Medical Loss Ratio (MLR) provision of Healthcare Reform that requires insurers to spend at least 80-to-85 percent of premium dollars on healthcare services and healthcare quality improvement.  If the insurance carriers do not meet this new requirement, they will be required to refund excess premiums to policyholders.

The other 15-to-20 percent insurance carriers may use for programs like education, prevention, overhead and even administrative systems that make healthcare more efficient. With the 80/20 budget requirements, insurers have redesigned their plans, cut broker commissions, and began looking for new ways to improve profitability.

With higher healthcare costs trickling down to business owners, some employers are less able to provide benefits to their employees. As a business owner, you recognize the benefits of providing health insurance for your employees, so what can you do?

Despite the uncertainty, working with a partner that has a clear vision of the legislative and economic environment can help you find a plan that is a) in line with your budget and b) ensures that your employees are still well taken care of.

We’ll continue to watch this issue and advocate for employers as legislation moves forward.