Spending premiums on actual health care

Congress has made some substantial changes to our health care system by way of the Affordable Care Act. At present, private insurance companies continue to act as intermediaries between patients and healthcare providers.
The simple fact is that insurance companies profit by spending as little as possible on policy holders’ health care needs. Money not spent on doctor’s visits or surgeries, for example, goes to things like overhead costs, paychecks for people who work for insurance companies, and profit for corporate owners and shareholders. In the past, this has upset consumers who felt their basic healthcare needs were going unmet while insurance executives enjoyed large salaries and luxury benefits.

Fortunately for consumers, federal law now requires insurance companies to spend between 80 to 85 percent of insurance premiums collected from healthcare plans on actual healthcare services for consumers. This is called a “medical loss ratio,” known to insurance nerds as MLR. If insurers spend less than 80 percent for small group policies or 85 percent for large group policies in a fiscal year, they must rebate the difference to consumers.

Most states already have the ability to regulate insurance companies, and the Affordable Care Act goes a step further to make sure you’re getting the most value for your insurance dollar. Medical loss ratios of 80 and 85 percent also ensure that you, the consumer, actually get health care when you need it.

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