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Small Business Employee Benefits and HR Blog

Medical Loss Ratio (MLR) Saved Americans $9 Billion Since 2011

According to the Health and Human Services, consumers have saved $9 billion on their health insurance premiums since 2011 due to the Medical Loss Ratio (MLR) rule. This year, the MLR program will return an average of $80 per family.MLR Rule Saved Americans $9 Billion

What is the MLR Rule?

Created by the Affordable Care Act, the Medical Loss Ratio (MLR) rule, also known as the 80/20 rule, requires insurers to spend at least 80 percent of premium dollars on patient care and quality improvement activities. 

If insurers spend more than 20 percent on overhead, administrative expenses, and profit they owe a refund back to consumers.

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 in their future premiums. Or, if the consumer bought insurance through their employer, their employer must provide one of the above options, or apply the refund in another manner that benefits its employees, such as more generous benefits.

Americans Saved $9 Billion Since 2011

According to the HHS report:

  • In 2013 consumers saved $3.8 billion up front on their premiums as insurance companies operated more efficiently. 

  • Additionally, consumers will save $330 million in 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.

Hard Hits for Brokers

While the MLR rule has provided cost savings to consumers, the MLR rule has significantly hurt broker commissions.

recent analysis found that in 2012 the MLR slashed health insurance broker commissions by $300 million.

That's because broker commissions are part of the 20% allowed for profit and administrative expenses. To comply with the rule, insurers have reduced broker commissions.

Have you saved money or lost money because of the MLR? Leave a comment.