As you might have guessed from my previous posts, I’m more or less in favor of the health care reform mandates, but there are still individual rules I’m concerned about, and some I’m definitely confused about. This post focuses on one such confusing rule--the requirement for payers to use 85 percent member premiums toward the MLR (Medical Loss Ratio). Simply, payers must spend at least 85 percent of the amount they collect toward the cost of care.

On the surface it’s a very admirable goal. Restrict your administrative overhead to 15 percent by making the organization more efficient and hence reduce the overall cost of care. Not bad. But when I start thinking about it a bit more, certain flaws in the logic emerge that could render the whole mandate impotent.

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