Writing at Huffington Post, Dan Karr explains why the the PPACA’s repeal or replacement is inevitable:
Political discussion aside, The Affordable Care Act (ACA) will fail for business reasons. Whether the ultimate result is the law getting repealed or modified, change is necessary to have a viable and vibrant health insurance industry that drives cost reduction and improved customer service.
The fundamental reason the ACA will fail is because it mandates a minimum Medical Loss Ratio (MLR). MLR is the percentage of premiums paid out to cover health care expenses. When this law came into effect, many American’s thought mandating MLR was good because it guaranteed a minimum level insurance companies would pay to cover health care costs. However, the unintended consequences are having the opposite effect.
The problems associated with mandating MLR are two-fold: 1) incentivizing the insurance industry to become less efficient; 2) contributing to the elimination of new insurers entering the market and increasing the level of competition.
I find this observation pretty ironic:
Health care costs increasing at more than two times the rate of increase in the Consumer Price Index is a problem the U.S. has suffered for decades. The ACA clearly did not cause this problem, however, the problem will worsen under any law that mandates MLR. The solution lies in pricing and cost transparency, encouraging competition and rewarding efficiency.
Ironic because many of us have been screaming about this for decades and the PPACA was structured as it was under the false assumption that covering more people would reduce costs. I also think that his solution is a phantasm. I think that effective solutions require providers to produce more health rather than incentivizing them to produce more care.