Impact of medical loss regulation on the financial performance of health insurers

Health Aff (Millwood). 2013 Sep;32(9):1546-51. doi: 10.1377/hlthaff.2012.1316.


The Affordable Care Act's 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's effect on insurers' financial performance, we measured changes between 2010 and 2011 in key financial ratios reflecting insurers' 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.

Keywords: Managed Care—Regulatory Issues.

Publication types

  • Research Support, Non-U.S. Gov't

MeSH terms

  • Costs and Cost Analysis
  • Delivery of Health Care / economics
  • Delivery of Health Care / legislation & jurisprudence
  • Efficiency, Organizational / economics*
  • For-Profit Insurance Plans / economics*
  • For-Profit Insurance Plans / legislation & jurisprudence
  • Government Regulation
  • Health Care Costs
  • Not-For-Profit Insurance Plans / economics*
  • Not-For-Profit Insurance Plans / legislation & jurisprudence
  • Patient Protection and Affordable Care Act / legislation & jurisprudence*
  • United States