Reform Update: Medical-loss ratio rules have saved consumers billions, but will it last?

The health reform law's provision requiring insurers to spend at least 80% of their premium dollars on medical expenses was a major factor in helping consumers save $3.9 billion in premiums last year, according to an analysis released today from the CMS (PDF). But whether that will translate into lower premiums for 2014 is up for debate.

Consumers saved more than $3.4 billion from lower premiums in 2012, and another half a billion in rebates they received if their carrier did not clear the so-called medical-loss ratio. That rule dictates that 80 cents of every premium dollar be spent on patient care for individual plans, and 85 cents for small-group plans. The provision has been in effect since 2011.

The CMS found that the MLR provision, also known as the “80/20” rule, prompted many plans to lower their rates or improve their coverage to meet the standard. If an insurer failed to meet the ratio for a plan, a rebate was issued to the member in the form of a check, a credit put on credit or debit card used to pay the premium or a reduction in future premiums. In the case of small-group coverage, the employer passes along the rebate through those mechanisms or uses the rebate in another way that helps employees, such as providing more generous benefits.

Teresa Miller, director of oversight for CMS' Center for Consumer Information and Insurance Oversight, said that 8.5 million Americans will receive $500 million in rebates this year, averaging to about $100 per family.

CCIIO Director Gary Cohen said that other factors also contributed to the reduction in premiums, noting that other provisions of the Patient Protection and Affordable Care Act have lead to increased competition among carriers and insurers' operating more efficiently.

Cohen, speaking on a call with reporters, was asked whether the benefits consumers see from the MLR provision could be eclipsed by higher premiums next year driven by other provisions of the law.

Cohen responded that the signals on premiums have varied from state to state depending on the level of competition among insurers. States that already had robust competition in insurance markets are seeing the most favorable rates proposed for 2014.

Senate Finance Committee Ranking Member Sen. Orrin Hatch (R-Utah) and eight colleagues have written HHS Secretary Kathleen Sebelius expressing concerns that the reform law's Navigator program lacks safeguards to prevent against fraud. Navigators are charged with helping consumers apply for health coverage through state insurance exchanges. “The standards proposed by your department could result in a convicted felon receiving federal dollars and gaining access to confidential taxpayer information,” the senators wrote today. “The unreasonably low standard for becoming a navigator not only undermines the state's ability to ensure consumers are protected but raises questions about the appropriate use of federal resources and the protection of highly sensitive consumer information.”

Between 2011 and 2012, enrollment in consumer-directed health plans, which give consumers more control over their health care spending, grew 19%, according to a study released Monday by the American Association of Preferred Provider Organizations. AAPPO analyzed data from the Mercer National Survey of Employer Sponsored Health Plans and found between 2011 and 2012, the number of employees who enrolled in a CDHP grew by 6 million, to 39 million. Also, in 2012, 36% of large employers (500 or more employees) offered CDHPs, up from the 32% the prior year.

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