Insurers spent 92 percent of individual claims revenue on healthcare and quality improvement in 2014, a vast improvement from the average of 79 percent they spent in 2010, according to two new briefs from the Robert Wood Johnson Foundation.
The Medical Loss Ratio, or MLR, is the percentage of patients' insurance premiums that pay for medical care and quality improvement efforts. While the concept is designed to help with cost of care rather than for administrative fees and profits, a very high MLR could mean losses for insurers if expenses for healthcare exceeds revenue.
In 2010, the average net MLR was lower than 80 percent in 29 states and higher in 21 states and the District of Columbia even before the Affordable Care Act's market reforms. By 2014, all but three states had average individual market net MLRs higher than 80 percent, according to the brief.
Before the MLR, consumers had trouble comparing products or choosing plans because insurers often did not issue accurate cost information. The Affordable Care Act set the MLR requirement to 80 percent in 2011, and since then, MLRs have been increasing steadily.
According to the other brief, insurers have struggled with finding a balance between keeping healthcare affordable and not losing any revenue. In 2014, 10 states and the District of Columbia had MLRs above 100 percent, which means they spent more on medical care than they brought in from premiums. Because of this, there is still a bit of uncertainty about what may influence premium rate-setting for 2016.
Overall, the researchers found that "individual coverage is likely to continue to provide a high level of benefits per dollar of premium paid" because federal subsidies will cover a large portion of premium increases due to the fact that enrollee premium contribution is capped based on income.