ACA Provision Saved Consumers $2.1B in 2012, Report Finds
U.S. consumers who purchased their own health coverage last year saved $2.1 billion because of the medical-loss ratio provision in the Affordable Care Act, according to a report released Thursday by the Kaiser Family Foundation, the Los Angeles Times' "Money & Co." reports (Terhune, "Money & Co.," Los Angeles Times, 6/6).
Under the medical-loss ratio provision, private insurers must spend at least 80% in the individual market, or 85% in the group market, of premium dollars on direct medical costs. Insurers that do not comply with the ratio must issue rebates to consumers (California Healthline, 6/4).
Thursday's report found that the provision helped reduce premiums by $1.9 billion and that insurers issued $1.1 billion in rebates last year (Viebeck, "Healthwatch," The Hill, 6/6). In addition, consumers are expected to receive $241 million rebates this year, the report stated. According to Kaiser Health News' "Capsules," the savings average to about $204 per policyholder (Appleby, "Capsules," Kaiser Health News, 6/6).
The report's authors pointed out that the rebates are not the only source of savings associated with the MLR provision. "Rebates represent only a portion, albeit the most concrete portion, of the MLR rule's savings to consumers," the report stated.
The report also noted that the majority of employer-sponsored plans offered by small and large businesses complied with the MLR provision before the ACA was enacted. However, it added that in the individual market "fewer than half of plans were in compliance with the ACA's MLR thresholds in 2010" ("Healthwatch," The Hill, 6/6).
Larry Levitt -- co-author of the study and senior vice president at KFF -- said, "One may or may not support the law or this provision in particular, but it's had the clear effect of keeping premiums down and lowering the amount of premium that goes to cost and profits."
Criticism of the Report
Some observers questioned the report's findings, saying the savings did not result from the MLR rule, "Capsules" reports.
Robert Laszewski -- a consultant and former insurance industry executive -- said the lowered premiums likely were caused by a longstanding decline in the use of medical care because of the struggling economy. He added that insurers also have cut commissions to insurance brokers.
"This is Obamacare cheerleading because it doesn't put the facts in context," Laszewski said, adding, "[T]hese rebates have not had an effect on profitability. What they've done is cut agents and brokers" ("Capsules," Kaiser Health News, 6/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.