To reduce excessive administrative costs, the health reform law mandates that insurers spend a minimum amount of revenue from premiums on payment for clinical care.
This is the "medical loss ratio" and the minimum level is set in the law at 85 percent for the large group market and 80 percent for the small group market. Insurers now are negotiating with federal regulators on what activities will be counted as administrative and which of those activities could be considered as clinical functions beyond treatment, such as preventive and disease management programs. In other words, insurers hope to get to the 15 to 20 percent administrative threshold by having some administrative costs now counted on the clinical side.
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