MLR: A fight for dsiclosure

Commercial insurance companies track the ‘medical loss ratio’ (MLR) as a measure of their profits and try to keep it low. This number refers to the % of the premium $ spent on direct patient care. A MLR of 80% means 80c of every $ earned in premiums is spent on direct patient care and 20c is then spent on administrative costs and profit, some of which is returned to shareholders. For regulators MLR is a measure of efficiency and financial strength. The health insurance legislation passed requires a minimum MLR of 80% for the individual and small group market and 85% for large groups. Large insurers report a lower MLR compared to smaller carriers. United Health reported a 82% MLR whereas the NAIC, the regulatory body overseeing insurers, reported it as 71% for the individual market, 79% for small groups and 84% for large groups. 
Comment: You guessed it! Large insurers have already shifted some expenses such as nurse hotlines expenses, clinical health policy and wellness program costs to the ‘medical expense’ side to game the system. Wellpoint, the big gorilla, projects that they will increase the MLR (or in their words the ‘benefit expense ratio’) by 1.7%, which translates to over $500 million of $30B in premiums it collects.