The debate over healthcare reform continues despite, or perhaps because of, passage of the Patient Protection and Affordable Care Act (PPACA) in 2010. This is due in part to the fact that U.S. healthcare spending remains at an all-time high at a whopping 17% of GDP. Another reason the debate continues is the fact that many of the new requirements represent an experiment, a response to the need to “do something.” The introduction of medical loss ratios (MLRs) as a requirement for healthcare insurance companies is one of those experiments.

The intent of the MLR requirements has been made plain by HHS: to ensure that health insurance premiums are mostly spent on medical treatments, and not on excessive administrative costs, executive salaries, or declared as profits. Within the law itself, the related provisions were titled in a way that communicates this intent clearly, “Bringing down the cost of healthcare coverage,” and, “Ensuring that consumers receive value for their premium payments” to cite just two examples (Section 2718).