Mark Lutes Featured in Q&A About Affordable Care Act Provision

Q: Which provision of the Affordable Care Act has had the greatest degree of success thus far with regard to implementation and achieving its objectives?

A: One of the ACA's "success" stories, in the eyes of its proponents, has been the requirement that insurers refund to groups/beneficiaries, that portion of premium that falls below a new percentage expenditure on claims and health care quality related activities (the "medical loss ratio" or "MLR"). Of course, like most things in Washington, the requirement has had unintended consequences. Thus, the celebration of "success" evidenced by MLR generated refunds needs to be tempered by a realization that the requirement limits the amount of retrospective and concurrent medical management (aka cost control) activities that can be taken by insurers thus working directly against any cost control goals associated with the ACA. Moreover, the "success" establishes profit controls on insured business thus making the ASO/self-funded book increasingly more attractive to carriers and thus contributing to the flight to self-funding among employers. Of course the flight to self-funding drives increasing percentage of coverage beyond the strictures that the ACA has imposed on insured products including premium increase regulation. While not the reason that MLR requirement was enacted -- a silver lining is that the MLR regulation encourages insurers to seek enhance medical management by delegating responsibility to provider organizations with the function supported by capitation and other bundled payments. Those who believe that provider incentivization is a preferable medical management solution to remote medical management should find solace in this unintended consequence. However, it is clear that the "success" of MLR regulation under the ACA has had unintended consequences that dwarf those that the provision was intended to produce.