State RegulationsNY specificDifficulty 1/5
Under the Affordable Care Act, what does a health insurer's medical loss ratio (MLR) measure?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under the Affordable Care Act, the medical loss ratio compares the premium dollars an insurer collects with the dollars it actually spends on medical claims and health care quality improvement, as opposed to administration and profit. Insurers whose spending falls below the applicable standard must return the shortfall to their policyholders. The ratio is a consumer-protection yardstick, not a reinsurance, deductible, or underwriting measure.
Why the other options are wrong
- A) Reinsurance cessions are unrelated; the MLR measures spending on care and quality versus premiums collected.
- B) An enrollee's deductible is not part of the calculation; the ratio concerns the insurer's use of premium dollars.
- C) Declination rates are an underwriting statistic; the MLR concerns claims and quality spending.
Memory hook
MLR: premium dollars in, care-and-quality dollars out.