The Affordable Care Act sets a minimum medical loss ratio of 85 percent for health plans that participate in the large group market and 80 percent for the individual and small group market. Plans will have to get their administrative costs under control just to be able to keep premiums competitive, many experts believe.

“Most health insurers adjusted pricing to comply with this new requirement” in 2011, according to A.M. Best, the credit rating company. Still, while utilization was lower for the second straight year, overall earnings were affected by the medical loss ratio (MLR) requirements.

“Health insurers are contemplating strategies for the future, which include marketing to individuals, growth in Medicaid, and ways to streamline processes and lower administrative costs,” says the Best report “Health Insurers Adapting to a Changing Environment,” which uses data it has collected, as well as government numbers, to reach its conclusions. If a state has concerns about meeting the 80 percent MLR, it can request a waiver.

“To date, 17 states have filed for an adjustment,” says the Best report. Nine were denied and six were granted.

Minimum loss ratio waivers
2011 2012 2013
Georgia 70% 75% 80%
Iowa 67% 75% 80%
Kentucky 75% 80% 80%
Maine 65% 65% 65%*
New Hampshire 72% 75% 80%
Nevada† 75%
*Maine must file additional data in 2012 to continue with adjustment in 2013
†Nevada applied for only a one-year adjustment for 2011

Costs will rise, but can stakeholder co-operation help?

The bigger picture shows that national health expenditures as a percentage of gross domestic product will continue to grow, “with a 20 percent increase in Medicaid expenditures projected in 2014.” The study says that health insurers and providers “have a renewed interest in cooperating and improved coordination of care. Both providers and insurers are studying and experimenting with payment methods that are based upon care management and outcomes.”

Medicare and Medicaid spending ($billions)

Medicare and Medicaid spending ($billions)
Source: “Health Insurers Adapting to a Changing Environment,” January 2012, A.M. Best

National health expenditures as percentage of GDP

National health expenditures as percentage of GDP
Note: Data are reflected in five-year increments, and includes the year of the study (2011) and the year the ACA mandates take effect (2014).

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There’s a lot more going on in health care than mergers (Aetna-Humana, Anthem-Cigna) creating huge players. Hundreds of insurers operate in 50 different states. Self-insured employers, ACA public exchanges, Medicare Advantage, and Medicaid managed care plans crowd an increasingly complex market.

Major health care players are determined to make health information exchanges (HIEs) work. The push toward value-based payment alone almost guarantees that HIEs will be tweaked, poked, prodded, and overhauled until they deliver on their promise. The goal: straight talk from and among tech systems.

They bring a different mindset. They’re willing to work in teams and focus on the sort of evidence-based medicine that can guide health care’s transformation into a system based on value. One question: How well will this new generation of data-driven MDs deal with patients?

The surge of new MS treatments have been for the relapsing-remitting form of the disease. There’s hope for sufferers of a different form of MS. By homing in on CD20-positive B cells, ocrelizumab is able to knock them out and other aberrant B cells circulating in the bloodstream.

A flood of tests have insurers ramping up prior authorization and utilization review. Information overload is a problem. As doctors struggle to keep up, health plans need to get ahead of the development of the technology in order to successfully manage genetic testing appropriately.

Having the data is one thing. Knowing how to use it is another. Applying its computational power to the data, a company called RowdMap puts providers into high-, medium-, and low-value buckets compared with peers in their markets, using specific benchmarks to show why outliers differ from the norm.
Competition among manufacturers, industry consolidation, and capitalization on me-too drugs are cranking up generic and branded drug prices. This increase has compelled PBMs, health plan sponsors, and retail pharmacies to find novel ways to turn a profit, often at the expense of the consumer.
The development of recombinant DNA and other technologies has added a new dimension to care. These medications have revolutionized the treatment of rheumatoid arthritis and many of the other 80 or so autoimmune diseases. But they can be budget busters and have a tricky side effect profile.

Shelley Slade
Vogel, Slade & Goldstein

Hub programs have emerged as a profitable new line of business in the sales and distribution side of the pharmaceutical industry that has got more than its fair share of wheeling and dealing. But they spell trouble if they spark collusion, threaten patients, or waste federal dollars.

More companies are self-insuring—and it’s not just large employers that are striking out on their own. The percentage of employers who fully self-insure increased by 44% in 1999 to 63% in 2015. Self-insurance may give employers more control over benefit packages, and stop-loss protects them against uncapped liability.