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Question: medical loss ratio mlr is the percent of premium an...

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Medical Loss Ratio (MLR) is the percent of premium an insurer spends on claims and expenses that improve health care quality. Under the Health Care Reform law, insurers and HMOs have to pay rebates to policyholders if they don’t meet an MLR standard of at least 80 percent (for individuals and small groups) or 85 percent (for large groups). Rebates are based on the previous calendar year's claims experience and are due by September 30 each year. Rebates apply only to insured plans. In almost all situations, rebates for employers or group policyholders are paid to the policyholder, not to the employees enrolled in the plan.

a. You are working for an insurer that covers 789,652 lives.  The average premium paid per enrollee per month is $1,042. Of the lives covered, 79.5% had a claim in the year 2016. Among those with claims, the average total amount paid out by the insurer is $13,415. What is the medical loss ratio for this insurer?

b. Next, compare this with an insurer that is covering 432,591 lives. This insurer charges an average premium of $986 per enrollee per month. Premiums are the only source of revenue for this insurer. This insurer spent $125,867,521 on administrative costs, made $741,123,873 in profit, and the remainder of the revenue was paid in claims.  What is the medical loss ratio?

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