ACA Hasn’t Cut Insurers’ Rate Of Overhead Spending: Study
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That's the chief finding of a team of researchers, including two prominent physicians on the faculties of the City University of
Examining U.S. Securities and Exchange Commission filings of nine large insurers, and using a constant definition of what constitutes an insurer's "medical loss ratio" or MLR - i.e. actual spending on payments to doctors, hospitals, pharmacies, etc. - the researchers found that the weighted average MLR in the three years after the new ACA regulations took effect (2011-2013) was 83.05 percent, compared to 83.04 percent in the three years prior to the reform.
The ACA sets limits on insurers' overhead, mandating an MLR of at least 80 percent in small-group markets and 85 percent in the large group market. However, the Obama administration changed the traditional yardstick by which the MLR is measured.
The new way of calculating the MLR allows insurers to classify most expenditures on "quality improvement" initiatives and the updating of coding systems as medical expenditures, and allows them to subtract most taxes, regulatory fees and "community benefit" spending.
"Rather than go along with the administration's moving of the goal posts to the apparent advantage of the insurers, we stuck with the traditional way financial analysts and insurance firms calculate MLR, namely, by dividing total medical payments by total premium income," said
"What we found is that there's been no significant change in the insurers' MLR since the implementation of the new regulations."
MLRs fell at four firms -
Day continued: "Although the MLR requirements forced insurers to pay rebates of
Day, whose published research includes articles on labor history and health care reform, currently serves as executive director at Healthcare-NOW, a national coalition of groups advocating for a single-payer health care system.
Senior author Dr.
"Most plans already met the MLR requirement from 2007-2009, even without the MLR redefinition in the ACA," Woolhandler said. "Moreover, self-insured employer plans, which accounted for 60 percent of all covered workers in 2011, were entirely exempt from the MLR requirement. In addition, a number of exemptions and adjustments were granted to a wide spectrum of plans and to several states, temporarily nullifying the new mandate."
Woolhandler observed that traditional
"The lesson is clear," she said. "We need to adopt a publicly financed, improved
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