Vertical integration between insurers and healthcare providers creates strong incentives to circumvent federal regulations designed to limit insurer profit margins and enhance patient welfare. This paper focuses on the minimum Medical Loss Ratio (MLR) requirement, which mandates that Medicare Advantage plans allocate at least 85% of their revenue to medical care. We examine whether the introduction of the MLR rule led to increased vertical integration and investigate whether vertically integrated insurers are concealing profits through the manipulation of internal transfer prices.
(with Ira Abraham, Boston College)