Thanks to the Affordable Care Act, consumers have greater protections when buying health insurance. The new medical loss ratio (MLR) rule requires that health insurance companies must spend at least 80 percent of premiums on medical care and quality improvement activities. Health insurers that fail to meet these minimum standards will be required to pay policyholders a rebate reflecting the difference.
If these rules had been in effect in 2010, 15.3 million health care consumers (5.3 million people in the individual market and 10 million in the small and large group markets) would have received $2 billion in rebates nationally, as found in a recent study by the Commonwealth Fund. Florida and Texas have the highest total estimated rebates of $109 million and $172 million, respectively. The estimated rebates per member range from $145 to $285.
Last year, health insurance commissioners in 17 states applied to reduce the amount that insurers must spend on medical claims. Fortunately, due to strong advocacy, consumers successfully have retained the new MLR standards in many states. Since the rule took effect in 2011, we want to see smaller rebates in subsequent years, which would mean insurers are doing the right thing, providing quality medical care to consumers rather than accumulating profits for themselves.
-- Quynh Chi Nguyen, Program and Policy Associate