Certified Financial Consultant (CFC) Practice Exam

According to the Medical Loss Ratio (MLR) guidelines, what is the minimum percentage of health coverage premium that must go towards actual medical care in an individual health plan?

1. 70%

2. 75%

3. 80%

4. 85%

The correct answer is: 80%

The Medical Loss Ratio (MLR) guidelines establish that a minimum percentage of health insurance premium revenues must be spent on medical care and health services rather than administrative costs or profits. For individual health plans, the MLR minimum is set at 80%. This means that insurers are required to allocate at least 80% of premium dollars to provide medical care, which is aimed at ensuring that consumers receive value for their premiums and that profits do not come at the expense of necessary healthcare services. This 80% threshold is part of broader efforts to enhance transparency and accountability in the health insurance industry, promoting a focus on patient care rather than administrative overhead. The MLR standards encourage insurers to manage their costs effectively and prioritize spending on quality medical care and services for policyholders.