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Emory Corp. Governance & Accountability Rev. Perspectives

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Since the Affordable Care Act (ACA) became law in 2010, it has been subject to political and constitutional scrutiny. While most critics have focused on the expansion of Medicaid and the individual mandate, the rest of the bill is by no means universally praised. One such controversial provision is the Medical Loss Ratio (MLR). Congress crafted the MLR with the purpose to improve patient care and reduce unnecessary administrative spending and excessive corporate profits. Those companies which do not, in a given year, spend the mandated amount on patient care, as opposed to other expenses, must make up the difference by providing a rebate to their policyholders. The purpose of the rebate is both to provide an incentive for insurance companies to comply with government regulations regarding revenue apportionment and compensate consumers who have been 'shortchanged.' This Perspective will (1) show that the MLR is constitutional, (2) but that it is nevertheless poor policy, and (3) suggest some alternatives for Congress to consider should it repeal and replace the ACA.

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