Benefit Expense Ratio

AAA

DEFINITION of 'Benefit Expense Ratio'

An operating metric used in the health insurance industry computed by dividing a company's costs associated with providing health services by the revenues from member premiums. Because of the large dollar values involved, a single percentage change in the benefit expense ratio can significantly impact the corporation's net income. Also called medical loss ratio or health benefit ratio.

INVESTOPEDIA EXPLAINS 'Benefit Expense Ratio'

The benefit expense ratio compares a health insurer's expenses for providing health care with the revenues it receives. General insurance providers would want to minimize this ratio as it would indicate an increase in top line growth relative to expenses.


In 2010, the Obama administration issued regulations regarding the proportion of premium dollars health insurers spend on patient care relative to administrative expenses. The regulation specifies targets of 80% for small business plans and 85% for large-company plans.

RELATED TERMS
  1. Premium Income

    1. In investing, income that is earned through the sale of an ...
  2. Commercial Health Insurance

    A type of health insurance that covers medical expenses and disability ...
  3. Group Health Insurance Plan

    An insurance plan that provides healthcare coverage to a select ...
  4. Premium

    1. The total cost of an option. 2. The difference between the ...
  5. Health Insurance

    A type of insurance coverage that pays for medical and surgical ...
  6. Risk Financing

    The determination of how an organization will pay for loss events ...
Related Articles
  1. Insurance

    Investing In Health Insurance Companies

    Health insurance companies work a little differently than most companies. Here's what you need to know as an investor.
  2. Professionals

    Helping Clients Choose Long-Term Care Insurance

    The need for long-term care has become an inescapable (and pricey) issue for retirees. Here's what financial advisors can do to help.
  3. Stock Analysis

    Could Amgen's Next Drug Be Worth $100 Billion?

    Amgen hopes it will win an FDA green light for evolocumab, a next-generation cholesterol fighter, which could grab a big chunk of the global statin market
  4. Stock Analysis

    How IPG Photonics Is Tapping Into The Auto Boom

    The manufacturing process of big industrial companies involves sophisticated laser technology to ensure precision and optimal efficiency in production.
  5. Stock Analysis

    Could This Drug Make Isis Pharmaceuticals Soar?

    Warfarin has been doctors' go-to anticoagulant for decades, but recently launched next-generation anticoagulants are increasingly winning market share.
  6. Stock Analysis

    3 Things That Could Hold Intuitive Surgical Back

    Taking a long-term view that favors Intuitive Surgical developer increasing in value, doesn't mean that there are near-term headwinds facing this company.
  7. Stock Analysis

    What’s The Smartest Way To Play Tobacco Stocks?

    While the United States economy continues to grow, the U.S. tobacco industry keeps shrinking.
  8. Stock Analysis

    Did Orexigen Make A Big Mistake?

    Developing drugs isn't cheap. Drugmakers spend $1.4 billion in direct costs to bring a typical drug through research trials to commercialization.
  9. Stock Analysis

    Is Arena Pharmaceuticals In Trouble?

    Arena Pharmaceuticals' approval of its weight-loss drug Belviq in 2012 has brought anticipations so high that its share price soared to $12 per share.
  10. Investing

    Multiple Myeloma: A Growing Market For Treatment

    American and European regulators have given Celgene Corporation the OK to begin marketing its top-selling myeloma drug Revlimid as a first-line therapy.

You May Also Like

Hot Definitions
  1. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  2. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  3. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  4. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  5. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
  6. Absorption Costing

    A managerial accounting cost method of expensing all costs associated with manufacturing a particular product. Absorption ...
Trading Center