Most insurers hit medical-loss ratio requirements: GAO

Roughly three-quarters of health insurers spent enough money on medical care to avoid paying refunds to their customers in 2011 and 2012, according to a report (PDF) issued by the U.S. Government Accountability Office. Insurers operating in the individual, small group and large group markets spent a median of 88% on medical care during those two years.

Under the Patient Protection and Affordable Care Act, insurers are generally required to maintain medical-loss ratios of at least 80% for the individual and small group markets, and 85% for the large group market. Health plans that fail to spend enough money on medical care are required to refund money to their customers. (A small group is typically defined as an employer with fewer than 50 employees.)

In 2011, the first year that the medical-loss ratio requirements were in effect, insurers sent $1.1 billion back to their customers. That figure dropped by more than half, to $520 million, the following year.

Insurers serving the individual market were significantly less likely to meet the medical-loss ratio requirement than those working with groups. Nearly a third of individual market insurers had to send out refunds in 2012. By contrast, just 18.6% of small group insurers and 13.7% of large group insurers failed to meet the federal mandate for medical expenditures.

The GAO report, requested by Sen. Jay Rockefeller (D-W.Va.), chair of the Committee on Commerce, Science and Transportation, also calculated how significantly refunds would be reduced if health plans were allowed to include fees paid to brokers in their medical-loss ratios. It found that allowing such costs to be included would reduce refunds to customers by roughly 75%. In 2011 and 2012, insurers would have returned just over $400 million to their customers.

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