Side Effects: Future of Private Insurance Rests in Secretary Sebelius’ Hands

Kathryn Nix / September 01, 2010

Obamacare requires insurers to meet a federally-specified medical loss ratio.  That is, they must spend a certain percentage of premiums on medical expenses.  The remainder can be used to cover administrative costs and, if there’s anything left, profits.  But if insurers don’t shell out enough in medical losses to meet the requirement, they’ll have to rebate the difference to policyholders

The idea is to limit insurers’ profits and create incentives to reduce administrative costs.  But it’s not as clear cut as it sounds.  After all, what exactly counts as a medical expense? (more…)