The Patient Protection and Affordable Care Act’s medical loss ratio rule saved consumers in the individual market an estimated $2.1 billion last year — the bulk of it on lower premiums costs, new analysis finds.
The MLR provision, which took effect in 2011, requires insurance companies to spend no less than 80 percent to 85 percent of collected premiums on actual medical care.
The analysis out Thursday from the Kaiser Family Foundation found that premiums for individual health insurance would have been $1.9 billion higher in 2012 if the MLR provision had not been in effect.
The premium savings are in addition to $241 million in rebates insurers estimate they will pay to customers in the individual market this year based on last year's performance.
The MLR provision led to $1.1 billion in consumer rebates last year, but researchers said the rebates weren’t the only beneficial part of the requirement.
“This is not the whole story for consumers,” study authors wrote. “Rebates represent only a portion, albeit the most concrete portion, of the MLR rule’s savings to consumers.”
Researchers said consumers and businesses are charged lower premiums to begin with as health insurers aim to price their plans to achieve the provision’s requirement. As insurers get closer to their target, more consumers will see MLR-related savings in the form of smaller premium bills rather than reimbursement checks.
Policyholders most likely to see lower premiums from the MLR were those who purchased coverage in the individual market because fewer than half of plans were in compliance with PPACA’s MLR thresholds in PPACA, whereas most plans sold to small and large businesses were already in compliance with their respective MLR thresholds before PPACA went into effect.
Brokers remain largely critical of the provision.