HHS: ACA Rate Oversight, MLR Provisions Saved Consumers Billions
On Thursday, HHS announced that insurance rate oversight provisions in the Affordable Care Act have helped consumers save about $1.2 billion on health insurance premiums since 2011, The Hill's "Healthwatch" reports.
Under the ACA, federal rate review rules that took effect in 2011 require insurers to submit to federal authorities proposed premium rate increases of 10% or more and justify those hikes. The law permits federal officials to question certain premium rate hike proposals, but they cannot stop insurers from implementing them, according to "Healthwatch" (Baker, "Healthwatch," The Hill, 9/12).
The ACA also has allocated about $250 million in additional funding from fiscal year 2012 through FY 2014 to help states enhance their own rate review programs, which have helped curb unnecessarily high rate-increases (CQ HealthBeat, 9/12).
HHS also said that consumers received $500 million in insurance rebates because their plans did not meet the ACA's medical-loss ratio requirements, Modern Healthcare reports.
The ACA's MLR provision requires private insurers to 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.
More Details on Consumers' Savings
HHS highlighted the savings from the ACA's rate review and MLR provisions in a pair of reports from the Office of the Assistant Secretary for Planning and Evaluation and CMS, respectively (Kutscher, Modern Healthcare, 9/12).
According to the ASPE report, insurers in 2012 proposed smaller rate increases in the individual and small group markets. The average rate request increase in the individual insurance market dropped by 12%, saving consumers roughly $311 million. Meanwhile, the average rate request increase in the small group market declined by 19%, saving consumers about $866 million. The report did not examine the large group market. Further, ASPE said that 26% of the requests in the individual market were for rate hikes of 10% or more, which was a marked decrease from 2011 when 43% of requests were for rate hikes of 10% or more (CQ HealthBeat, 9/12).
In a statement accompanying the announcement about the rate review savings, HHS Secretary Kathleen Sebelius touted the ACA's insurance exchanges, which will begin open enrollments in about two weeks. "This type of competition and transparency will continue" in the new online marketplaces, she noted ("Healthwatch," The Hill, 9/12).
Meanwhile, CMS' report noted that 8.5 million people received rebates totaling $500 million -- or an average of $100 per family -- while a total of 77.8 million consumers saved $3.4 billion on their premiums over the whole year because of the MLR rule.
Study: ACA's MLR Provision Caused Insurers' Profits To Decline
In related news, a new Health Affairs study found that the ACA's MLR provision has strained operating margins for many insurers, particularly for-profit companies that serve the individual market, Modern Healthcare reports. Researchers analyzed insurers' administrative cost ratios in 2010 and 2011, before and after the so-called 80/20 rule took effect.
In the individual market, the MLRs rose by 5.5 percentage points while the administrative cost ratios declined by 2.6 percentage points and operating margins fell by 1.3 percentage points. Meanwhile among for-profit insurers, the MLRs increased by 7.7 percentage points while administrative costs and operating margins declining by 2.9 and 2.2 percentage points, respectively.
Insurers in the large group market appeared to be shielded from the effects of the MLR rule. Not-for-profit insurers' operating margins increased by 0.7 percentage points while for-profit insurers saw a 1.2 percentage-point gain as their MLRs dropped from 87.6% in 2010 to 86.9% in 2011 (Modern Healthcare, 9/12).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.