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Primer

Medical loss ratio

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Sunday, April 30, 2006

· In health insurance, the fraction of revenue from a plan's premiums that goes to pay for medical services.

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· The portion of health plan revenue that does not cover administrative or marketing expenses, taxes and profits.

· Viewed from different angles, a measure of the profitability of a health insurer, the quality of health care enjoyed by its customers, the competitiveness of pricing in the marketplace or the efficiency of its non-medical activities.

· A number that traditionally ranges from 75 percent for the most profitable and efficient plans to more than 100 percent for money-losing plans.

· For Aetna, a figure that increased last quarter from 74.6 to 79.4, causing a 20 percent plunge in its share price when it was announced.

· According to analysts, the best indicator of a future turn in the health-insurance industry's profit cycle.

-- S.P.


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