Counterpoint

One indication that America may have a “healthcare election” in 2028 is that the key issue between Democrats and Republicans in the current government shutdown is the status of “temporary” subsidies for the Health Insurance Marketplace plans. The Marketplace plans are likely the best-known feature of the Patient Protection and Affordable Care Act (the “ACA”), about which Nancy Pelosi famously stated about the “we have to pass the bill so that you can find out what is in it.” 

As is increasingly their bent, Congress is focusing on the symptom instead of the disease, either out of ignorance or cowardice. “Everyone knows” about the persistent efforts by the Republican Party to overturn the ACA by focusing on the very narrow, if legally strategic, issue of whether the “individual mandate” provision was a “tax” or a “penalty.” In a recent post, I explained the potential that the Q2 earnings reports of several health insurers was a signal of the “death spiral” that was long predicted if the individual mandate were removed from the ACA.

The focus on a “silver bullet” solution is always more politically expedient than overhauling flawed legislation, which is why Congress only overhauls the Internal Revenue Code every 30-40 years. In the past 15 years, scoring political points by talking about “eliminating” or “protecting” the ACA has been much more politically expedient than “fixing” the ACA.

Without “fixing” the ACA, the future of the U.S. healthcare system as we know it is bleak. The fundamental flaw in the ACA is not the individual mandate but rather the mandate that health insurers meet minimum medical loss ratios (MLRs), an Orwellian phrase which CMS describes this way:

"The Affordable Care Act requires health insurance issuers to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). It also requires them to issue rebates to enrollees if this percentage does not meet minimum standards. The Affordable Care Act requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the rate review provisions imposing tighter limits on health insurance rate increases."¹ 

Minimum MLRs are possibly the most poignant example in Congressional history of a road to hell paved with good intentions. As should have been obvious to at least one member of Congress in March 2010, the inevitable corollary of mandating an 85% MLR is limiting profit margins to 15%, resulting in the least reported 10th Amendment issue of our time. 

More than 2/3 of Fortune 500 companies are incorporated in Delaware, including Cigna, CVS, Humana and UnitedHealth Group. Martin Lipton, arguably the preeminent corporate lawyer of the past 50 years, described the purpose of a corporation as follows:

“The purpose of a corporation is to conduct a lawful, ethical, profitable and sustainable business in order to create value over the long-term, which requires consideration of the stakeholders that are critical to its success (shareholders, employees, customers, suppliers, creditors and communities), as determined by the corporation and the board of directors using its business judgment and with regular engagement with shareholders, who are essential partners in supporting the corporation’s pursuit of this mission.”² 

Under Delaware law, officers and directors have a fiduciary duty to act in the best interest of the corporation, with a focus on creating long-term value.^3,4 As a result, the ACA’s mandatory cap on profit margin requires directors and officers of Delaware corporations to pursue strategies to increase revenue.

Not by coincidence, many health insurers have acquired numerous companies since the passage of the ACA, resulting in overall revenue growth, particularly in lines of business not subject to the ACA’s MLR requirement. 

A recent Health Affairs article highlighted the opportunities for “vertically integrated” health insurers to “game” MLR. We highlighted such an example in our recent 2025 Trends Shaping the Health Economy Report. 

Does this fact pattern result in systemic waste? Yes. Is this fact pattern illegal? No. In fact, it would be economically irrational and, under Delaware law, arguably a breach of fiduciary duty for UnitedHealth Group not to do this, a legal consideration that the authors of the Health Affairs article fail to articulate. 

By statutorily capping the profits on every insurer’s fully-insured business at 15%, Congress paradoxically removed any incentive for any payer to limit cost increases for most of its provider networks, which explains this:

There is no evidence that healthcare has become more affordable since the passage of the ACA, the increasing cost of which is borne by employers and taxpayers.

Whether this spending trend is a feature or a bug is a political question. Whether Congress has the brains or the courage to remedy their colossal mistake remains to be seen. Until then, Congress should expect that the directors and officers of health insurers incorporated in Delaware will continue to exercise their fiduciary duties to maximize the value of their enterprises.