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Dangers of mandating medical loss ratios – Pacific Research Institute

Dangers of mandating medical loss ratios

John R. Graham of the Pacific Research Institute discusses the harms of the medical loss ratios mandated in ObamaCare (HR 3590):

One of the ways in which ObamaCare will reduce individuals’ and businesses’ choices of health insurance is through regulating the Medical Loss Ratio (MLR), a relatively simple concept: Take the amount of dollars an insurer spends on medical care and divide it by the total premiums. For example, if an insurer earns $10 million in premiums and spends $8.5 million on medical claims, its MLR would be 85 percent. Under ObamaCare, policies that cover large businesses will have to achieve an MLR of 85 percent, while those for small businesses and individuals will have to achieve an MLR of 80 percent. That shouldn’t be too hard, should it? …

“The Medical Loss Ratio is an accounting monstrosity that enthralls the unsophisticated observer and distorts the health policy discourse,”2 explains professor James C. Robinson of the University of California, Berkeley. This “monstrosity” emerges for a number of reasons, according to the professor. …

Narrow networks obviously have fewer administrative costs than broader networks, but patients appear to value broader networks nevertheless. …

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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