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.