3 MLR Questions Payers, Providers Should be Asking

Karen Minich-Pourshadi, January 17, 2011

On the surface it may seem to hospital financial leaders that the medical loss ratio (MLR) regulation doesn’t really impact hospitals and health systems, however, as I noted in last week’s column, there’s more to this policy than meets the eye for providers.

MLR, which took effect Jan. 1 has broad implications for federal and state healthcare expenditures. This policy addresses the amount of premium dollars spent on a member care by payers and the ripple effect will affect providers.

Under the Patient Protection and Affordable Care Act there is now a mandated minimum threshold that insurers must comply with regarding spending on member care. For instance, the amount of the premium spent on member care would be 85 cents on the dollar for large groups and for smaller groups it would be 80 cents on the dollar. A large group would be an IBM or a General Electric vs. a smaller group would have approximately 20 members or less.

Three important questions are emerging from this policy:

  1. Where will payers look to find ways to cut costs to compensate for the losses from MLR? 
  2. What are the broader implications of this policy for providers?
  3. What can providers and payers do to comply with this regulation?

Brenda Snow, executive vice president of strategic planning, for the Kentucky-based Firstsource, a global provider of revenue cycle management services, works with both payers and providers and she offers her thoughts on these critical questions.

Karen Minich-Pourshadi Karen Minich-Pourshadi is a Senior Editor with HealthLeaders Media. Twitter
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