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The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 2

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Overview

For the past two years, the Affordable Care Act has required health insurers to pay out a minimum percentage of premiums in the form of medical claims or quality improvement expenses—known as a medical loss ratio (MLR). Insurers with MLRs below the minimum must rebate the difference to consumers. This issue brief finds that total rebates for 2012 were $513 million, half the amount paid out in 2011, indicating greater compliance with the MLR rule. Spending on quality improvement remained low, at less than 1 percent of premiums. Insurers continued to reduce their administrative and sales costs, such as brokers’ fees, without increasing profit margins, for a total reduction in overhead of $1.4 billion. In the first two years under this regulation, total consumer benefits related to the medical loss ratio—both rebates and reduced overhead—amounted to more than $3 billion.

Publication Details

Publication Date: May 12, 2014
Contact: Michael J. McCue, R. Timothy Stack Professor, Department of Health Administration, School of Allied Health Professions at Virginia Commonwealth University
Citation: M. J. McCue and M. A. Hall, The Federal Medical Loss Ratio Rule: Implications for Consumers in Year 2, The Commonwealth Fund, May 2014.

Experts

R. Timothy Stack Professor, Department of Health Administration, School of Allied Health Professions at Virginia Commonwealth University
Fred D. & Elizabeth L. Turnage Professor of Law, Wake Forest University School of Law