Regime Change for Health Insurance Regulation: Rethinking Rate Review, Medical Loss Ratios, and Informed Competition

The recently enacted Patient Protection and Affordable Care Act aims to transform regulation of private health insurance. It would put in place a new federal regulatory regime that prescribes various mandates for covered benefits, imposes tighter restrictions on insurance premiums, sets limits on how premium dollars are spent, and exerts much greater political and bureaucratic control over health insurance.

As part of the American Enterprise Institute project, Beyond "Repeal and Replace": Ideas for Real Health Reform, insurance expert Scott E. Harrington argues that this new regulatory regime misdiagnoses the causes of health insurance problems and will worsen them. His study focuses in particular on the legislation's new requirements for rate review, minimum medical loss ratios, and rescission of insurance coverage.

The author offers a clear market-oriented alternative to the new law's agenda of top-down political controls. Harrington proposes reforms that would protect consumers and enhance the value of health insurance coverage, by promoting informed competition, individual choice, and personal responsibility. Instead of building a larger federal bureaucracy to ride herd on the states, his reforms would rely on targeted minimum standards for state regulation of health insurance that enhance existing consumer protections and promote competition among financially sound health insurers.

Click here to read the full paper as an Adobe Acrobat PDF.

Scott Harrington is an adjunct scholar at AEI.

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