U.S. Residents Saved $3.9B in 2012 Under MLR Provision, Sebelius Says

The medical-loss ratio provision in the Affordable Care Act helped U.S. residents save about $3.9 billion in 2012 through a combination of lower health insurance premiums and rebates, HHS Secretary Kathleen Sebelius announced Thursday, The Hill's "Healthwatch" reports (Baker, "Healthwatch," The Hill, 6/20).

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.

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HHS said that the provision helped about 77.8 million U.S. residents save a total of $3.4 billion from lower premiums in 2012. In addition, insurers will pay $500 million in rebates to employers and individuals after Aug. 1 for failing to comply with the provision (Humer, Reuters, 6/20).

Specifically, HHS said consumers would receive an average rebate of about $100 per family, about $50 less per family than insurers paid last year when the provision took effect (Schatz, Wall Street Journal, 6/20).

CMS Deputy Administrator Gary Cohen said insurers are paying fewer rebates in 2012 than in 2011 because they are more strictly adhering to the law and charging lower premiums up front. Cohen said, "As [insurers have] adjusted their prices to the new rule, as they've become more efficient and more cost effective, two things happen: the number of rebates goes down and the corresponding amount of premium that people have to pay for the value they are getting for insurance comes down as well" (Reuters, 6/20).

Cohen also noted that other provisions of the ACA have contributed to lower premium rates by increasing competition among carriers and encouraging insurers to operate more efficiently (Block, Modern Healthcare, 6/20).