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Heath Care Reform Explained: Medical Loss Ratio

Last week, you may have heard about a  controversy between McDonald’s and the Department of Health and Human Services (HHS) over a portion of the new health reform law that deals with MLR (Medical Loss Ratio).

MLR is a key measure of how good your health insurance is.  For example, many high-quality employer plans have MLR’s of 90%, while a catastrophic plan can easily have an MLR below 50%. The new health care law requires MLR to be between 80% to 85% for ALL plans, meaning that insurance providers have to spend at least 80% to 85% of the premium dollars they take in on medical care.

Seems great right?  Insurance companies take less profit, consumers win.
However, some companies that offer cheap plans are worried they won’t be able to meet the higher standards.  For example, the Wall Street Journalreported that McDonald’s says they won’t be able to meet the new MLR standard with their “mini-med” plans due to “high administrative costs owing to frequent worker turnover, combined with relatively low spending on claims.”

“Mini-med” plans offer low premiums in exchange for extremely limited benefits, like a cap of $2,000 in health care claims a year.  McDonald’s wanted an exemption from the new MLR standard for these plans.

So what happened?  It is still not settled, but it looks like McDonald’s could win.  The White House signaled they would let HHS exercise their “discretion” in regulating “Mini-med” plans.

Stay tuned as this story continues to develop.  And if you have other questions on health reform that you would like explained, email us at