Arizona Health Insurance Practice Exam

What is the term for the proportion of premium revenues spent on clinical services and quality improvements?

1. Cost-sharing ratio

2. Medical loss ratio

3. Benefit ratio

4. Expense ratio

The correct answer is: Medical loss ratio

The term that refers to the proportion of premium revenues spent on clinical services and quality improvements is known as the medical loss ratio. This metric is crucial in the health insurance industry because it directly impacts how much of the premiums collected from policyholders is utilized for actual medical care versus administrative expenses or profits. Health insurers are often required to maintain a certain medical loss ratio to ensure that a significant portion of premiums is used for patient care, emphasizing the goal of delivering value in healthcare services. This concept plays a vital role in regulatory frameworks, as higher medical loss ratios imply better utilization of funds for improving patient health outcomes and quality of care. It is essential for consumers to understand this term as it affects the overall effectiveness and efficiency of their health insurance coverage.