Health Insurance Policy Provisions Practice Exam 2025 – Complete Prep Guide

The main focus of medical loss ratios (MLRs) in health insurance is to ensure a balance between administrative costs and the costs associated with providing medical care to policyholders. MLRs are calculated as the percentage of premium dollars that an insurance company spends on medical care and health services, compared to the total amount it collects in premiums. Under the Affordable Care Act, insurers are required to spend a certain percentage of premiums on medical care and can only use a limited amount for administrative costs and profits.

When insurers do not meet the required MLR thresholds, they are compelled to issue rebates to policyholders, ensuring that consumers receive value for their premiums and that a significant portion is spent on actual healthcare services rather than administrative overhead. This focus on balancing costs ultimately aims to enhance the quality and accessibility of medical care for insured individuals.

Setting consumer premium rates, ensuring profitability for insurers, or calculating healthcare market trends do not directly align with the primary purpose of MLRs, which is to promote efficiency in spending and ensure that customers benefit from their insurance payments through adequate medical services.