Why You Should Care About The 'Medical Loss Ratio'

Atlantic Wire - Ted Mann - December 3rd
Unless you are a health care worker or a health care industry employee, you likely haven't given a ton of thought to the medical loss ratio. That is, simply stated, the percentage of health insurance company spending that actually goes to pay for the medical care delivered to people.

If you are a health care industry employee, particularly one of the executive variety, you have likely given a lot of thought to the medical loss ratio in the last several years, and especially in the past day. That's because the federal Department of Health and Human Services just issued its final rule on the topic, implementing an aspect of the Obama health care law that played little part in the public debate, but matters tremendously to insurance companies.

Under the new rules, insurers must spend at least 80 percent of the money they take in from insurance premiums (less taxes and fees) toward providing health care to their customers. If they don't spend that percentage, insurers will now be required to send rebates back to the people paying the premiums.

A thorough explanation of the rule and its effects is at Health Affairs. Over at Forbes, Rick Ungar writes that this is the actual "bomb" health insurers were worried about in the otherwise not-all-that-radical Obamacare bill.