Healthcare Benchmark Calculator

Understanding the ACA’s Medical Loss Ratio (MLR) Provision
The Affordable Care Act (ACA) includes a provision known as the Medical Loss Ratio (MLR) rule. This regulation requires health insurance companies to spend a minimum percentage of premium dollars on healthcare services and quality improvement:

• 80% for small group and individual plans: At least 80% of premiums must go toward medical claims and quality improvement activities, leaving up to 20% for administrative costs, marketing, and profit.
• 85% for large group plans: At least 85% must be used for claims and quality improvement, leaving up to 15% for administrative costs and profit.

The Premium Distribution Calculator helps employers analyze how their healthcare premium dollars are distributed and compare their spending to industry benchmarks. This insight can guide decisions about potential cost-saving strategies.

How to Use This Calculator

1. Input Employee and Premium Information:
   • Enter the number of employees covered by the health plan.
   • Input the total annual premium you pay for your group health insurance.
2. Enter Claims Data:
   • Provide the total medical claims for the last 12 months.
   • Provide the total prescription drug claims for the same period.
   • If you don’t have claims broken out, you can input the total aggregate claims instead.
3. Select Market Type:
   • Choose your health plan market type:
     • Small Group (80% Claims / 20% Admin) – Under 50 Employees Enrolled
     • Large Group (85% Claims / 15% Admin) – Over 50 Employees Enrolled
4. Calculate Results:
   • Click the “Calculate” button to view your results
     
     

Understanding Your Results

1. Premium Allocation:
   • Total Claims Fund: The amount of your premium allocated to paying medical and pharmacy claims.
   • Administrative Costs: The amount of your premium spent on overhead, profit, and other non-claim costs.
2. Key Metrics:
   • Per Employee Claims Fund: How much is spent per employee on claims annually.
   • Per Employee Admin Costs: How much is spent per employee on administrative expenses annually.
   • Medical Claims Per Employee Per Year: Average annual medical claim cost per employee.
   • Pharmacy Claims Per Member Per Month: Average monthly prescription claim cost per covered member.
3. Loss Ratios:
   • True Loss Ratio (Net of Admin Fees): Compares claims to premium dollars allocated for claims, excluding administrative costs.
   • Loss Ratio (Inclusive of Admin Fees): Compares total claims to the full premium amount.
4. Color-Coded Insights:
   • Results are color-coded to help you quickly assess efficiency:
     • Green: Spending is within an optimal range.
     • Orange: Spending is moderate but may require review.
     • Red: Spending exceeds benchmarks and could indicate inefficiencies.