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Report: Medical loss ratio has no impact on private insurers' overhead

Plans met MLR limit before Affordable Care Act was in place

The Affordable Care Act seemingly has had little or no impact on health insurers' overhead, according to a new report from the International Journal of Health Services.

The report's authors examined medical loss ratios (MLRs) using the pre-2011 definition set by the Department of Health and Human Services: Total premium income divided by total medical payments. The authors analyzed this data for risk-bearing plans for every insurer listed in the Fortune 500 for three years prior to and after implementation of the MLR rule in 2012. The rule requires an MLR of at least 80 percent in the individual and small-group markets and 85 percent in the lage-group market.

Here's what the authors found:

  • The average MLR of the nine Fortune 500 insurers assessed did not change before and after the new regulation: 83.04 percent for 2009-2010 and 83.05 percent for 2011-2013. (Cigna was excluded from the study due to changes in accounting practices that made an accurate assessment impossible.)
  • MLRs dropped at three of the four largest insurers. UnitedHealth's MLR from 2008-2010 was 81.6 and fell to 80.9 percent for 2011-2013. Humana's was 83.4 percent and dropped to 83.2 percent, while Aetna's was 83.0 percent and fell to 81.6 percent.
  • Centene experienced the most significant increase in MLR. From 2008-2010, the average was 83.3 percent; it rose to 88.5 percent for 2011-2013.

"Although overhead was reduced at some insurers, with one exception these reductions were within the range of year-to-year fluctuations commonly seen in the past," the authors pointed out. Additionally, these results are consistent with trends in the National Health Expenditure Accounts, which found medical spending decreased slightly as a proportion of private insurance premiums two years into ACA implementation. Finally, the report concluded that overhead at private insurers remains six times as high as traditional Medicare overhead.

As of late, insurers have pushed for change to MLR requirements, FierceHealthPayer previously reported. The industry wants payments to brokers and agents excluded from administrative costs, claiming that their inclusion in MLR calculations hurts insurers' bottom lines and drives up premiums.

For more:
- here's the report (.pdf)

Related Articles:
Insurers push for change to medical-loss ratio
CBO: Excluding broker fees from MLR would cost $1B
GAO: Most insurers met MLR requirements