The U.S. Department of Health and Human Services announced that Americans will receive $332.2 million in premium rebates due the Medical Loss Ratio (MLR) provision. Shortly after, Weiss Ratings, an independent research and analysis provider, released their analysis, including the ten insurers who owe the most in MLR rebates.
Background on the Medical Loss Ratio
Implemented under the Affordable Care Act (ACA), the Medical Loss Ratio (MLR) provision (commonly referred to as the 80/20 rule) requires that insurers spend at least 80 percent of premium dollars collected on medical care and healthcare quality improvement.
If the insurer spends more than 20 percent of premium dollars on administrative or overhead costs, the consumers are owed a rebate at the beginning of each August. This provision was enacted to ensure that health insurance consumers are receiving more value for their premium dollars, to hold the insurance companies accountable for their spending, and to combat the rising cost of health insurance.
MLR rebates can come by a refund check in the mail, a lump-sum reimbursement to the same account that was used to pay the premium, or a reduction of their future premiums. The provision has already saved Americans millions of dollars:
In 2013 consumers saved $3.8 billion on their premiums up-front as insurance companies operated more efficiently.
Additionally, consumers will save $330 million due to refunds, with 6.8 million consumers due to receive an average refund benefit of $80 per family.
The MLR and other Affordable Care Act standards contributed to consumers saving approximately $4.1 billion on premiums in 2013, for a total of $9 billion in savings since the MLR program began in 2011.
Each year, more insurers are meeting the 80/20 standard by spending more of the premium dollars they collect on patient care and quality improvements.
Medical Loss Ratio Rebates for 2013
Although $332.2 million sounds like a substantial amount for rebates, it is just a small portion of the premiums collected for 2013. According to Weiss’ analysis, the $332.2 million in over-paid premiums is just 0.7 percent of the $450 billion in total premium income for 2013.
Additionally, the $332.2 million is a 34 percent drop from the $504.2 million refunded for 2012, proving that the insurers are becoming more cautious of their spending.
In fact, according to Weiss, only 6.7 percent of insurers have been required to pay rebates. That’s only 119 out of the 1,771 insurers who fell short of the 80 percent of premium dollars that are to be spent on medical care and healthcare quality improvement.
Weiss’ analysis points out that seven out of the ten companies who were required to pay back the most in rebates were Life and Annuity insurers.
Chart Source: Weiss Investment Ratings
The average family will receive a refund of around $80; however, Weiss’ analysis also showed that in some states, insurers will be refunding significantly more money. The average refund amount in the top five states was significantly more:
Minnesota’s average refund: $522
Alaska’s average refund: $388
Montana’s average refund: 286
Wyoming’s average refund: 268
Iowa’s average refund: $206
Read the analysis at: Weiss Investment Ratings
Although $332.2 million seems like a large rebate, it is a significant decrease from 2012’s MLR rebates. The 93 percent of insurers that met or exceeded the amount of premium income they are required to spend on medical expenses is a good sign that consumers are getting a better value for their premium dollars.
How has the MLR affected you? Leave a comment below.