A term used to describe the amount of money spent on health care. Example: a loss ratio of 0.85 spends 85 cents of every premium dollar on health care and remaining 15 cents on administrative costs.

• A. It indicates 85% of premium dollars are spent on health care and 15% on administrative costs
• B. It indicates a 15% markup on premiums
• C. It indicates 85% profit margin
• D. It indicates 85% of premiums are kept as reserves

Answer: (A)