Health insurers' use of quality improvement expenses to achieve a minimum medical loss ratio requirement |
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Authors: | Patricia H. Born E. Tice Sirmans Petra Steinorth |
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Affiliation: | 1. The National Alliance Program in Risk Management and Insurance, Department of Risk Management/Insurance, Real Estate & Legal Studies, College of Business, Florida State University, Tallahassee, Florida, USA;2. Department of Finance, Insurance, and Law & The Katie School of Insurance and Risk Management, College of Business, Illinois State University, Normal, Illinois, USA;3. Institute for Risk Management and Insurance, Hamburg Business School, University of Hamburg, Hamburg, Germany |
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Abstract: | Health insurer medical loss ratios (MLRs) are the percentage of premium dollar spent on medical claims and healthcare quality improvement expenses (QIEs). QIEs include activities to improve patient health outcomes and safety, reduce medical errors, and prevent hospital readmissions. The Affordable Care Act mandates minimum MLRs in certain health insurance markets lest rebates be paid to policyholders. QIEs are reported in all markets regardless of whether that market is subject to minimum MLR requirements. Using health insurer statutory filings for a sample of group market insurers from 2010 to 2018, we employ a mixed regression discontinuity/regression kink approach to evaluate whether QIEs are used by insurers as a potential strategy for meeting the minimum MLR requirement. We show that health insurers' QIE increase in the loss ratio until meeting the minimum MLR requirement, have a significant discontinuous jump at the threshold, and decrease above the threshold after the introduction of the MLR mandate. |
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Keywords: | affordable care act healthcare quality improvement expenses health insurance |
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