Health care law’s MLR provision would have saved consumers $2 billion in 2010

WTF Commonwealth Fund MLR savings 4.6.12

A report by the Commonwealth Fund estimated that consumers would have saved $2 billion in 2010 had a key health care reform provision been implemented a year earlier. 

SOURCE: Commonwealth Fund

Under the Affordable Care Act, insurance companies must devote between 80% to 85% of health premiums to covering medical costs. Insurers who don’t meet the Medical Loss Ratio (MLR) thresholds beginning in 2011 are required to issue rebates to policyholders.

“Consumers can expect to see some relief from high premium costs beginning this year, either in the form of rebates or a reduction in their premiums as insurers lower rates to meet the medical loss ratio minimums,” said Commonwealth Fund Vice President Sara Collins. “Cutting down on administrative and other non-medical costs will lower premiums and help make health insurance more affordable for all.”

Had the MLR rule been applied in 2010, the Commonwealth Fund estimated that insurance companies would have issued nearly $2 billion in rebates last year.

More than 5 million consumers who purchased individual plans would have received rebates ranging from $100 to $300 per person; more than 4 million small businesses would have received rebates ranging from $20 to $489 per person.

Read more: Health insurance costs rising faster than wages & inflation

During the past two decades, individuals and small businesses have struggled to keep up with double-digit annual rate increases. In California, Anthem Blue Cross announced premium hikes of up to 39% in 2010 and

The MLR provision was designed to hold insurance companies accountable for holding down overhead and administrative costs and to bring premium increases under control.

Since the MLR limit went into effect, some small business owners, like Brian England, actually saw their health insurance rates drop.

“It was just total disbelief when [the insurance agent] said it was going to go down 6%,” England said at a Democratic news conference marking the Affordable Care Act’s second anniversary. “We made no major changes to our group. It is the same insurance company, same average age. Everything was the same, and it was going down. So it was just unbelievable news.”

The MLR rule will be repealed if the Supreme Court decides to strike down the entire health care reform law.
 

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4 Comments on “Health care law’s MLR provision would have saved consumers $2 billion in 2010

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