Impact Of Medical Loss Regulation On The Financial Performance Of Health Insurers

The Affordable Care Act\u27s regulation of medical loss ratios requires health insurers to use at least 80-85 percent of the premiums they collect for direct medical expenses (care delivery) or for efforts to improve the quality of care. To gauge this rule\u27s effect on insurers\u27 financial performance, we measured changes between 2010 and 2011 in key financial ratios reflecting insurers\u27 operating profits, administrative costs, and medical claims. We found that the largest changes occurred in the individual market, where for-profit insurers reduced their median administrative cost ratio and operating margin by more than two percentage points each, resulting in a seven-percentage-point increase in their median medical loss ratio. Financial ratios changed much less for insurers in the small- and large-group markets ©2013 Project HOPE-The People-to-People Health Foundation, Inc