Medical Cost Ratio (MCR)

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Definition of 'Medical Cost Ratio (MCR)'

The medical cost ratio (MCR) is a measure of a health insurance plan's efficiency. It is calculated by dividing the total cost of medical claims paid by the plan by the total amount of premiums collected. The MCR is expressed as a percentage.

A low MCR indicates that the plan is more efficient in paying claims, while a high MCR indicates that the plan is less efficient. The MCR is an important factor to consider when choosing a health insurance plan, as it can help you to estimate how much you will pay in premiums and out-of-pocket costs.

The MCR is also used by the government to regulate health insurance plans. The Affordable Care Act (ACA) requires health insurance plans to have an MCR of at least 80%. This means that for every dollar in premiums collected, the plan must spend at least 80 cents on medical claims. Plans that do not meet this requirement must provide rebates to their enrollees.

The MCR is a valuable tool for consumers and regulators to use in evaluating health insurance plans. However, it is important to note that the MCR does not take into account all of the costs of health insurance. For example, the MCR does not include administrative costs or profits. As a result, the MCR may not be an accurate reflection of the true cost of a health insurance plan.

Despite its limitations, the MCR is a useful tool for comparing health insurance plans. By considering the MCR, consumers can get a better idea of how much they will pay in premiums and out-of-pocket costs.

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