Healthcare and pharma
Medical loss ratio (MLR)
The share of health insurance premiums spent on medical care and quality improvement.
Facts checked against sources onWhat does Medical loss ratio (MLR) mean?
The medical loss ratio is a health insurer's spending on claims and on activities that improve care quality, divided by premiums. The rest pays for administration, marketing and profit. In the United States, the Affordable Care Act requires insurers to spend at least 80 percent of premiums on care in the individual and small-group markets and 85 percent in the large-group market, or pay rebates to customers. Example: an insurer collecting 1,000 per member and spending 860 on care has an MLR of 86 percent, leaving 140 for everything else. For investors, a rising MLR usually signals higher use of care and lower profit.
Where does it come up in case interview prep?
Related terms
- Loss ratioClaims as a share of premiums earned.
- PMPM (per member per month)A cost or revenue figure divided by the number of members and months, used by health plans.
- CapitationPaying a provider a fixed amount per person per period, whatever care they use.
- Loss of exclusivity (LOE)When a drug's patents and other protections end and cheaper copies can launch.
- BiosimilarA near copy of a biologic medicine, approved as having no meaningful clinical difference.
- DRG (diagnosis-related group)A system that pays hospitals a fixed amount per admission, based on the diagnosis and treatment.
- ARPOB (average revenue per occupied bed)Hospital revenue divided by occupied bed days, a key measure for Indian hospital chains.
- Average length of stay (ALOS)The average number of days patients stay in hospital per admission.
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