Insurers Paid $1.5B in Rebates Under MLR Rule in 2011, 2012
In 2011 and 2012, insurers paid out more than $1.5 billion in rebates to consumers in compliance with the Affordable Care Act's medical loss ratio provision, according to a report released Monday by the Commonwealth Fund, The Hill reports (Al-Faruque, The Hill, 5/13).
Under the ACA, private insurers are required 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 (California Healthline, 9/13/13).
For the report, researchers -- led by Michael McCue at Virginia Commonwealth University -- analyzed data obtained from CMS and examined the effects of the MLR rule on the insurance market over the two-year period, CNBC reports.
In addition to making $1.5 billion in total rebate payments in 2011 and 2102, the report found that:
- Insurers during the two-year period were forced to reduce their overhead costs by a total of about $1.75 billion without increasing their profit margins;
- The MLR requirement has not resulted in a significant reduction in competition among insurers;
- Insurers spent an average of 1% of their premiums on initiatives to improve care quality for customers, even though credit for such spending is included in the MLR formula; and
- Only a small number of insurers owed their customers rebates in 2012, compared with 2011, meaning that many of them had become compliant with the MLR requirement.
Further, the report found that in 2011, insurers paid out about $1 billion in rebates and that the average rebate for each consumer during that year was:
- $116 in the small-group market;
- $108 in the individual market; and
- $99 in the large-group market.
The report found that insurers in 2012 returned a total of about $500 million in rebates to consumers and that the average rebate for a customer during that year was:
- $95 in the individual market;
- $86 in the small-group market; and
- $57 in the large-group market.
McCue said he expects the total amount of rebates to continue to "gradual[ly] decline" in the coming years (Mangan, CNBC, 5/13).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.