New Study: Health Insurance Overhead Waste Unchanged by Affordable Care Act

The International Journal of Health Services published a research paper by Healthcare-NOW!’s Executive Director, Benjamin Day, PNHP co-founders David Himmelstein and Steffie Woolhandler, and former Healthcare-NOW! intern Michael Broder, titled “The Affordable Care Act and Medical Loss Ratios: No Change in First Three Years.” The article found that, despite the promise of the Affordable Care Act to reduce health insurers’ overhead spending and thereby to increase the share of patients’ premiums that goes toward medical spending, overhead waste has not gone down since implementation of the law. The joint press release from Healthcare-NOW! and PNHP is below:


March 12, 2015

Health law hasn’t cut insurers’ rate of overhead spending: study

Study finds Affordable Care Act’s requirement that health insurers spend at least 80-85 percent of premiums on actual medical care had no impact in the law’s first three years

Despite claims by the Obama administration that the Affordable Care Act will reduce health insurance companies’ spending on overhead, thereby channeling a greater share of consumers’ premium dollars into actual patient care, insurers’ financial filings show the law had no impact on the percentage of insurer expenditures on such things as administration, marketing and profits.

That’s the chief finding of a team of researchers, including two prominent physicians on the faculties of the City University of New York’s School of Public Health and Harvard Medical School, in an article published Wednesday in the peer-reviewed International Journal of Health Services.

Examining U.S. Securities and Exchange Commission filings of nine large insurers, and using a constant definition of what constitutes an insurer’s “medical loss ratio” or MLR – i.e. actual spending on payments to doctors, hospitals, pharmacies, etc. – the researchers found that the weighted average MLR in the three years after the new ACA regulations took effect (2011-2013) was 83.05 percent, compared to 83.04 percent in the three years prior to the reform.

The ACA sets limits on insurers’ overhead, mandating an MLR of at least 80 percent in small-group markets and 85 percent in the large group market. However, the Obama administration changed the traditional yardstick by which the MLR is measured.

The new way of calculating the MLR allows insurers to classify most expenditures on “quality improvement” initiatives and the updating of coding systems as medical expenditures, and allows them to subtract most taxes, regulatory fees and “community benefit” spending.

“Rather than go along with the administration’s moving of the goal posts to the apparent advantage of the insurers, we stuck with the traditional way financial analysts and insurance firms calculate MLR, namely, by dividing total medical payments by total premium income,” said Benjamin Day, the study’s lead author.

“What we found is that there’s been no significant change in the insurers’ MLR since the implementation of the new regulations.”

MLRs fell at four firms – UnitedHealth, Humana, Aetna and WellCare – and increased slightly at four others and markedly at one (Centene, a major managed Medicaid contractor).

Day continued: “Although the MLR requirements forced insurers to pay rebates of $1.1 billion in 2011 and $504 million in 2012 – payments that were touted by the Department of Health and Human Services as a major boon to consumers – these rebates constituted less than 0.1 percent of private insurance company revenues and appear to have had no overall impact on MLRs.”

Day, whose published research includes articles on labor history and health care reform, currently serves as executive director at Healthcare-NOW, a national coalition of groups advocating for a single-payer health care system.

Senior author Dr. Steffie Woolhandler, professor at the City University of New York’s School of Public Health at Hunter College and co-founder of Physicians for a National Health Program, said a number of factors might explain why the ACA hasn’t raised MLRs.

“Most plans already met the MLR requirement from 2007-2009, even without the MLR redefinition in the ACA,” Woolhandler said. “Moreover, self-insured employer plans, which accounted for 60 percent of all covered workers in 2011, were entirely exempt from the MLR requirement. In addition, a number of exemptions and adjustments were granted to a wide spectrum of plans and to several states, temporarily nullifying the new mandate.”

Woolhandler observed that traditional Medicare’s overhead is about 2 percent, i.e. 98 percent of Medicare’s spending goes toward medical care. “The ACA is too lenient on private insurers, sets too low a bar for their payments for actual care, and provides them with too many loopholes.

“The lesson is clear,” she said. “We need to adopt a publicly financed, improved Medicare for All.”

The Affordable Care Act and Medical Loss Ratios: No Impact in First Three Years,” Benjamin Day, M.A., David U. Himmelstein, M.D., Michael Broder, B.A., Steffie Woolhandler, M.D., M.P.H. International Journal of Health Services, Vol. 45, No. 1 (January 2015).

The full text of the article is available at the links above or from Mark Almberg at

The International Journal of Health Services ( contains articles on health and social policy, political economy and sociology, history and philosophy, ethics and law in the areas of health and health care.


  1. Laura Goldberg on March 12, 2015 at 10:56 pm

    We need a single payer healthcare system! Nothing else will be as effective for we the people. Check out Europe!

    • Jan on March 14, 2015 at 9:38 pm

      Yes, in 2009 T.R. Reid published The Healing of America. He takes readers on a trip around the world, comparing healthcare. The best care he received for a gimp shoulder was Auyervidic medicine in India. But, he states. India is like the USA: you have the money. you get the best of care; no money, you die.

  2. Laura Goldberg on March 12, 2015 at 10:58 pm

    We need a single payer healthcare system – nothing else will be effective for We The People!

  3. John Morrison on March 13, 2015 at 12:10 am

    How can this measurement say anything when it goes from 2011 to 2013. Most people weren’t registered for the AHCA until 2014? I’m all for single payer but isn’t this a bit of a scare tactic? And to what end?

    John Morrison
    San Francisco

    • Ben on March 13, 2015 at 11:33 am

      Hi John – Good question. Different parts of the Affordable Care Act went into effect in different years. You’re right that Medicaid expansions and exchange subsidies didn’t go into effect until 2014, but the regulation on insurance companies’ overhead spending started in 2011. Certainly not intended as a scare tactic – just evidence that the regulation hasn’t been effective in practice, although reclaiming all of those wasted healthcare dollars for patient care is crucial for expanding coverage to everyone (and being able to afford it!).

  4. Dianne Wilkins on March 13, 2015 at 11:40 am

    Really insane to exempt the insurers of 60% of all covered workers from meeting even the watered down ACA version of the MLC requirements. Just highlights, the insurance companies lobbyist major influence on the process of creating the ACA and the reason it is not helpful to majority of average citizens.

    The only way to lower health care costs is to cut out the middle man – the insurance companies, all together and our corrupt congress with its limitless office terms and campaigning will never vote for what is good for the majority. Limit terms and set a mandatory low cap on campaign contributions w/same amount of air time for all, would help the country tremendously but we have to somehow convince voters to get rid of most of the lifer congressmen first. Lifer congressmen weld too much power because they have traded their congressional votes for campaign finance from big businesses for decades in order to stay in office. Where are the trade unions to organize at least 10,000 people to protest in the streets of DC for universal healthcare? More corruption?

  5. Ethel Silverberg on March 13, 2015 at 1:54 pm

    Isn’t it time we became as modern as we think we are?
    Single-payer is the only humane way to go!

  6. Carl Olson on March 15, 2015 at 11:37 am

    The continuation of “for profit” health care is the problem. We must demand expanded Medicare for all Americans from birth to death…cut out the insurance leeches.