Medical loss ratio's role in the large group insurer market.

Objectives: To assess trends in the medical loss ratio (MLR) and understand how health insurance premiums in the large group market are driven by medical claims spending and insurer margins.

Study design: Study of approximately 500 insurers covering more than 40 million lives annually in the large group market that submitted an MLR submission form (2014-2022).

Methods: We assessed trends in the MLR, premiums, medical claims spending, administrative costs, quality improvement spending, and margins among all insurers in the large group market.

Results: The mean MLR was 90.0% (2014-2020), which increased to 91.8% in 2021 before declining in 2022. Spending on both administrative costs and quality improvement was small and stable during this period. In contrast, premiums and medical claims spending grew between 2014 and 2020, with claims spending increasing 9.4% between 2020 and 2021 compared with just 3.9% for premiums. This mirrored the observed trend in insurer margins, which increased from 2014 to 2020 before experiencing a temporary decline in 2021.

Conclusions: Medical spending is the primary driver of premiums in the large group market. Efforts to address growing health insurance premiums in the US will require consideration of how medical spending contributes to this growth.