Cover photo with the words "Why Is Healthcare So Expensive?" with two men handing each other money.

Why Is Healthcare So Expensive?

October 20, 20233 min read

“To understand why costs continue to go up you have to understand the MLR” - Anthony Pacheco

What's the MLR:

MLR stands for Medical Loss Ratio, it was introduced into legislation in 2010 as part of the Affordable Care Act. "At its most basic, a MLR measures the share of health care premium dollars spent on medical benefits, as opposed to company expenses such as overhead or profits. For example, if an insurer collects $100,000 in premiums and spends $85,000 on medical care, the MLR is 85%. ... The ACA requires an annual, minimum 80% MLR for individual and small group insurance plans, and an annual, minimum 85% MLR for large group plans."

Sounds easy enough right? So why didn't it work the way they intended it to? Watch this video to learn more and we'll continue down below:


Key Takeaways

1. Theories and Results Are Two Different Things

The requirement to spend 80% of money coming in to pay claims does not end up equalling better coverage for those who are paying into the system. It has resulted in costs continuing to go up as the profits for large insurance companies are based on getting the 20% of higher and higher premiums.

2. This Will Not Change

Costs will continue to increase so long as people continue to use the large (publicly traded) insurance companies, here's why... they are not looking to do what's best, cost wise, for the people paying the premiums. Their duty is to do what's best for their shareholders. That is why they will never align with the same goals as the people paying the premiums. (It's what we call having mis-aligned incentives. Your goal is not the same as their goal.)

3. To The Crazy Ones

Now let's say you want to find a way to make the goals/outcomes/incentives align... this is where people will start to call you crazy. Even though solutions have been around for since 1974, many people don't realize that these options exist. Or, they've heard horror stories about them. Yep, we're talking about "self-funding" the benefits. Let's use a sports analogy to help simplify why you may want to look for a "crazy" solution. Do you want to play offense (being proactive) with your benefits instead of always playing defense (being reactive)? Then head to the checklist below to see if you're ready to start.

The Crazy Ones Checklist:

A checklist to see if you are ready to start looking for alternatives where you can play offense with your benefits instead of playing defense all the time.

  • Are you tired of rate increases every year with no control of why, or how the increases happen?

  • Do you wish your employees would actually to go to the doctor when they need to... instead of avoiding it because they don't want to pay the out of pocket costs (or can't afford to)?

  • Want a long term strategy that gives you transparency into your benefits and allows you to create a plan ahead of time?

  • Are you facing hard questions like, keeping insurance in place vs. firing people to be able to afford it?

If you checked at least one of the boxes above then we should talk. You can contact us to have a conversation about your options.

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Emily Evans

Emily has been in the insurance industry for more than 12 years and loves helping her clients by being a solutions engineer.

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We service clients nationwide with our team of Benefit Doctors.

Emily specializes in the states of Arizona, Florida, and Texas. (All the places where her family lives. 😁)

Her focus is on clients from 10 employees up to 500 employees.

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