Medical expense ratios reflect the percentage of premium revenue that is spent on health care expenses; the remainder is spent on administrative expenses and profit. HMO medical expense ratios have remained fairly constant since 1996, with the median medical expense ratio dropping slightly from 89.2% in 1997 to 86.2% in 2002.

Notes: Medical expense ratio calculated as Total Medical Expenses/(Total Revenue - Investment Revenue).

Source: InterStudy Publications, The InterStudy Competitive Edge 13.2, Part II: HMO Industry Report, (reporting data as of January 1, 2003), October 2003, Figure 9, p. 60.