Nearly $1.5 Billion in Savings Across States in 2011 from Medical Loss Ratio Requirement

eAlert d04e5203-656a-42dc-8c2d-eee3ab52b67e

<p>Consumers saw nearly $1.5 billion in health insurer rebates and overhead cost savings in 2011 as a result of the Affordable Care Act's medical loss ratio provision, which requires health insurers to spend at least 80 percent of premium dollars on health care or quality improvement activities, or else pay a rebate to their customers, according to a new <a href="/publications/issue-briefs/2012/dec/insurers-responses-regulation-medical-loss-ratios">Commonwealth Fund study</a>. </p><p>Those with individual policies, in particular, made large gains as insurers reduced both administrative costs and profits to meet the new standards, which restrained premium growth. While insurers in the small- and large-group markets achieved lower administrative costs, not all of these savings were passed on to employers and consumers, as many insurers increased profits. </p>
<p>For their study, Michael McCue of Virginia Commonwealth University and Mark Hall of Wake Forest University examined how insurers selling policies for individuals, small-employer groups, and large-employer groups in every state responded to the medical loss ratio requirement between 2010, the year just before the new rule took effect, and 2011, the first year it was in place. In individual insurance markets, 39 states saw administrative costs drop, 37 states saw medical loss ratios increase, and 34 states saw reductions in operating profits. </p>
<p>Visit <a href="/publications/issue-briefs/2012/dec/insurers-responses-regulation-medical-loss-ratios"></a> to learn more about how consumers in each state have fared under the new rule. </p>