The intent of the Medical Loss Ratio (MLR), also known as the 80/20 Rule, provision under the Affordable Care Act (ACA) was to establish a standard by which to limit profits for health insurers. The rule requires insurers to invest 80% of premium intake into care costs and health improvement measures, with the remaining 20% distributed between overhead and profits. Note that this standard is slightly different for the large group market, allowing for an 85/15 distribution of premiums.
At first glance, this seems like a positive change. Why wouldn’t you want to limit the amount that these insurance companies can retain for profits? But you know what they say about where a road paved with good intentions leads…
Ask, “How do you drive up the 20% that contributes to company profits?”, and the answer becomes clear:
Premium equals revenue and when premiums are tied to the medical loss, if your insurance company puts measures in place to lower your medical loss, that also means a drop in premiums.
A drop in premiums equals loss of revenue which is counterproductive for any profits-driven company.
It’s time to throw out this rule in place of one that will ensure that insurance companies are incentivized to actually follow through when it comes to prioritizing member health. As industry leaders, it is our responsibility to advocate for a better healthcare system and TALON has been at the forefront of driving that change for nearly a decade.
Working together with legislators on the Transparency in Coverage Rule was the first step. Since then, TALON has created an all-encompassing solution that brings together member empowerment through our MyMedicalShopping™ pricing tool, member engagement through our MyMedicalRewards™ program, and integrates those rewards through HSA, HRA, and cash debit accounts with TALONPay™.
Once again, TALON is leading the rallying cry for legislative change. Let’s work together to keep the healthcare industry moving forward toward a system that benefits the consumer instead of those who continue to profit by keeping them in the dark.
Our Co-founder, President & CEO, Mark Galvin speaks more about the 80/20 Rule in a recent Townhall article.