Pros and Cons of Obamacare: Is It What the United States Needs? THE AFFORDABLE CARE ACT AND MEDICAL LOSS RATIOS: NO IMPACT IN FIRST THREE YEARS

insurers ’ overhead, mandating a medical loss ratio (MLR) of at least 80 percent in the individual and small-group markets and 85 percent in the large-group market starting in 2011. In implementing the law, the Obama administration introduced new rules that changed (and inflated) how insurers calculate MLRs, distorting time trends. We used insurers’ filings with the U.S. Securities and Exchange Commission to calculate the largest insurers ’ MLRs before and after the ACA regulations took effect, using a constant definition of MLR. MLRs averaged 83.04 percent in the three years before reform and 83.05 percent in the three years after reform. We conclude that the ACA had no impact on insurance industry overhead spending. The Patient Protection and Affordable Care Act (ACA) set a minimum level for health insurers ’ Medical Loss Ratios (MLRs), or the share of premiums devoted to medical payments (i.e., actual payments to doctors, hospitals, pharmacies, etc.). It mandated an MLR of at least 80 percent in the individual and small-group markets and 85 percent in the large-group market commencing in 2011. Insurers falling short of required MLRs are required to rebate the difference to enrollees (1). This provision was expected to reduce insurers ’ overhead. We evaluated it