Consumers Saved $3.9B on Premiums in 2012

Health care law will provide families an average of $100 back in premium rebates

Today, the Department of Health and Human Services (HHS) announces that nationwide, 77.8 million consumers saved $3.4 billion up front on their premiums as insurance companies operated more efficiently.  Additionally, consumers nationwide will save $500 million in rebates, with 8.5 million enrollees due to receive an average rebate of around $100 per family.

Today’s report includes the 2012 health insurer data required under the Affordable Care Act’s Medical Loss Ratio, or “80/20 rule.”  The report shows that, compared to 2011, more insurers are meeting this standard and spending more of their premium dollars directly toward patient care and quality, and not red tape and bonuses.

Created through the Affordable Care Act, the rule requires insurers to spend at least 80 cents of every premium dollar on patient care and quality improvement.  If they spend a higher amount on other expenses like profits and red tape, they owe rebates back to consumers.  For many consumers, the report found that the law motivated their plans to lower prices or improve their coverage to meet the standard.  This new standard and other Affordable Care Act policies contributed to consumers saving approximately $3.9 billion on premiums in 2012, for a total of $5 billion in savings since the program’s inception.

“The health care law is providing consumers value for their premium dollars and ensuring the money they pay every month to insurance companies goes toward patient care,” HHS Secretary Kathleen Sebelius said.  “Thanks to the law, 8.5 million Americans will receive $500 million back in their pockets and purses.”

If an insurer did not spend enough premium dollars on patient care and quality improvement, rebates will be paid in one of the following ways:

  • a rebate check in the mail;
  • a lump-sum reimbursement to the same account that they used to pay the premium if by credit card or debit card;
  • a reduction in their future premiums; or
  • their employer providing one of the above, or applying the rebate in another manner that benefits its employees, such as more generous benefits.

Insurance companies that do not meet the standard will send consumers a notice informing them of this new rule.  The notice will also let consumers know how much the insurer did or did not spend on patient care or quality improvement, and how much of that difference will be returned as a rebate.

The 80/20 rule, along with the required review of proposed double-digit premium increases, works to stabilize and moderate premium rates.  And, with the new market reforms, including the guaranteed availability protections and prohibition of the use of factors such as health status, medical history, gender and industry of employment to set premiums rates, this policy helps ensure every American has access to quality, affordable health insurance.

To access the report released today, visit: http://www.cms.gov/cciio/Resources/Forms-Reports-and-Other-Resources/index.html#Medical Loss Ratio

For more information on MLR, visit: http://www.healthcare.gov/news/factsheets/2010/11/medical-loss-ratio.html

Related articles

Advertisements

Holding Insurance Companies Accountable for High Premium Increases

— by Kathleen Sebelius, Secretary of Health and Human Services

The Affordable Care Act (ACA) prohibits some of the worst insurance industry practices that have kept affordable health coverage out of reach for millions of Americans.  It provides families and individuals with new protections against discriminatory rates due to pre-existing conditions, holds insurance companies accountable for how they spend your premium dollars, and prevents insurance companies from raising your insurance premium rates without accountability or transparency.

For more than a decade before the ACA health insurance premiums had risen rapidly, straining the pocketbooks of American families and businesses.  Oftentimes, insurance companies were able to raise rates without explanation to consumers or public justification of their actions.

One of the provisions of the ACA is that insurance companies must now reveal the percentage of premium dollars they actually spend on health care and how much they spend on administration (e.g., salaries and marketing. Prior to ACA, this type of information was a closely held secret and insurance companies pocketed a good percentage of your premium dollars. With ACA in place, that’s no longer the case. If an insurance company spends less than 80% of premiums on medical care and quality (or less than 85% in the large employer, large group market), it must rebate the portion of premium dollars that exceeded this limit. This 80/20 rule is commonly known as the Medical Loss Ratio (MLR) rule

Chart showing the percent of rate filings that requested increases of 10 percent or more. 2009: 72%, 2010: 75%, 2011: 51%, 2012: 34%, 2013: 14% Rate Review in Action
The ACA brought an unprecedented level of scrutiny and transparency to health insurance rate increases by requiring insurance companies in every state to publicly justify their actions if they want to raise rates by 10% or more.  Insurance companies are required to provide easy to understand information to their customers about their reasons for significant rate increases, and any unreasonable rate increases are posted online.

And it’s working.  A new report released today shows that the health care law is helping to moderate premium hikes.  Since this rule was implemented, the number of requests for insurance premium increases of 10% or more has dropped dramatically, from 75% to 14%.  The average premium increase for all rates in 2012 was 30% below what it was in 2010. And available data suggest that this slowdown in rate increases has continued into 2013.

Moreover, when an insurer does decide to increase rates, consumers are seeing lower rate increases than what the insurers initially requested.  In the review of rate requests for 10% or more, over 50% resulted in customers receiving either a lower rate increase than requested or no increase at all.

States have received $250 million in Health Insurance Rate Review Grants to help strengthen and improve their rate review processes thanks to the Affordable Care Act.  Of the 44 states that received rate review grants, 40 have reported enhancements to their rate review websites.  These website enhancements include searchable rate filings, new public comment options, live streaming of rate hearings, and plain language explanations of rate review and rate filings.

The Effective Rate Review program is one of many in the health care law aimed at protecting consumers.  The rate review program works in conjunction with the 80/20 rule, which requires insurance companies to generally spend 80% of premiums on health care or provide rebates to their customers. Insurance companies that did not meet the 80/20 rule have provided nearly 13 million Americans with more than $1.1 billion in rebates. Americans receiving the rebate will benefit from an average rebate of $151 per household.

Additionally, today we issued a final rule that implements five key consumer protections from the Affordable Care Act, including protection against denial of health coverage because of a pre-existing condition.  This rule makes the health insurance market work better for individuals, families and small businesses, and it also increases the transparency brought to rate increases by directing insurance companies in every state to file all of their rate increase requests.

For more information about the Affordable Care Act, visit http://www.healthcare.gov/index.html.

Related Posts

Your Insurance Company & Costs of Coverage

The Affordable Care Act includes features that promote transparency and hold insurers accountable for how they spend your premium dollars and rate increases. “Medical Loss Ratio” and “Rate Review” are two features of the health care law that are in place and making a difference for consumers.

  • Medical Loss Ratio: Insurers must, in general, spend 80% or 85% of the premium dollars they take in on health care costs and health care improvement activities. If they do not, they must provide refunds to policy holders. Learn more about Medical Loss Ratio.
  • Rate Review: Health insurance companies must tell consumers when they want to increase insurance rates for individual or small group policies by an average of 10% or more. Learn more about Rate Reviews.

Use this search tool at healthcare.gov to find a basic profile of your insurance company or information about Medical Loss Ratio (MLR) and Rate Reviews. To get started, select your state, enter the name of your insurance company, or enter the company’s NAIC Number (consumers can find the NAIC Number on their policy document, from their state Department of Insurance website or by contacting their insurer). Then select Overview, MLR, or Rate Reviews and click the Search button. You can also use the Rate Review tool further down the page to find rate increases where you live. Note: Not all states currently have rate reviews to report.