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populations. 79 The expensive pool of policyholders provokes insurers to hike insurance premiums to combat the ACA’s financially-burdening effect; however, the ACA anticipated this reaction. 80 The ACA included Medical Loss Ratio (MLR) provisions to protect consumers from increased premium hikes. 81 The restriction on how insurers can spend premium dollars is called an MLR. 82 As of 2011, insurers must devote a minimum percentage of premium revenue (at least eighty percent in the individual and small-group market and eighty-five percent in the large-group market), to medical claims and quality improvement, limiting the amount that can be utilized for salaries, administrative efforts, marketing, and insurer profits. 83 Insurers must refund enrollees the shortfall if they fail to satisfy these requirements. 84 With this policy change, the ACA intends to improve transparency for consumers and force insurers to increase value of premium dollars. 85 While MLR limitations may be seen as a driver for insurer consolidation, they are also touted by some as a protection against premium increases if the proposed insurance mergers are allowed to move forward. 86 However, the idea that MLR standards will prevent insurers from increasing consumer premiums is not a realistic or logical defense for several reason. First, MLR limitations do not apply to self-insured plans, where the employer or other plan sponsor pays the cost of health benefits from its own assets. 87 Even when an insurer administers the self-funded plan on behalf of an employer, the MLR standard does not apply. 88 This leaves a large portion of consumers-– more than half of private sector employee plans-–exempt from MLR limitations, allowing insurers to raise administrative fees on this population to make up for the covered lives under MLR limitations. 89 Second, capping
79. Martin Feldstein Editorial, Martin Feldstein: Obamacare Could Raise Premiums and the Ranks of the Uninsured, WASH. POST (Nov. 6, 2009), http://www.washingtonpost.com/wp- dyn/content/article/2009/11/05/ AR2009110504327.html. 80. Id. 81. ObamaCare Affects Health Insurance, supra note 78. 82. Explaining Health Care Reform: Medical Loss Ratio (MLR), KAISER FAM. FOUND. (Feb. 29, 2012), http://kff.org/health-reform/fact-sheet/explaining-health-care- reform-medical-loss-ratio-mlr/ [hereinafter KAISER FAM. FOUND.]. 83. Id. 84. Dafny, supra note 22. 85. KAISER FAM. FOUND., supra note 82. 86. Letter from Melinda Reid Hatton, Senior Vice President & General Counsel of the Am. Hospital Ass’n, to Ted Nickel, Comm’r of the Wisconsin Officer of the Comm’rs of Ins., & Katherine L. Wade, Comm’r of the State of Connecticut Ins. Dep’t (Feb. 23, 2016), http://www.aha.org/advocacy-issues/letter/2016/160223-let-consolidation.pdf [hereinafter AHA Letter to State Ins. Comm’rs]. 87. KAISER FAM. FOUND., supra note 82. 88. Id. 89. AHA Letter to State Ins. Comm’rs, supra note 86.