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ACA puts a cap on the profit margins of insurers. It does not put a cap on the total profit of insurers. Mandatory minimum medical loss ratios (MLR) actually co
by will_pseudonym 10y ago
ACA puts a cap on the profit margins of insurers. It does not put a cap on the total profit of insurers. Mandatory minimum medical loss ratios (MLR) actually could have the opposite of the desired effect. To maintain $X in profits that they enjoyed before the minimum MLR, an insurance company would just need to increase total premiums and benefits. This means that they're less incentivized to reduce benefits/premiums, since their profits rise when both rise. It also more strongly encourages mergers of insurance companies, reducing competition.
- lxmorj 10y agoI used to work for a utility company and there was a huge aversion to any innovation that drove costs down. Guaranteed ROI is incredibly counter-productive as a regulatory measure.
- RA_Fisher 10y agoGotta keep that cost basis high to apply the ROR against! Build a big nuclear reactor paid for by the rate-payers pass go and collect 8-10% ROR!
- smallnamespace 10y agoThere's actually little incentive to do this because increasing the cost basis usually costs more investor dollars.
- RA_Fisher 10y agoNot if they get pre-approval in a rate case. Well and like the OP mentions it's often done by overlooking efficiency gains.