Practice Economics

Commonwealth Fund: ACA’s medical loss ratio rule saves $5 billion


 

References

The Affordable Care Act’s requirement that health insurers pay out a minimum percentage of premiums in medical claims or quality improvement generated $5 billion in savings from 2011 to 2013, according to the Commonwealth Fund.

However, insurance companies were not increasing spending on quality improvements during that period, according to a report released March 26.

Under the ACA, insurers who fail to meet minimum percentages of premiums paid as claims must rebate the difference to consumers.

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In 2011, insurers paid $1.1 billion in rebates, researchers found. That figured dropped to $325 million in 2013, with the rebate total across the 3-year period being nearly $2 billion. The remaining $3 billion was generated from reductions in administrative costs without any increase in net profits during that time period.

The decline in consumer rebates reflects “greater compliance with the [medical loss ratio] rule,” the report’s authors noted, and “that insurers are spending a larger percentage of premium dollars on medical claims.”

The report noted that insurers could spend premium dollars on quality improvement to meet requirements – but in 2013, those quality improvement expenses remained at just below 1% and were relatively steady during the study period.

gtwachtman@frontlinemedcom.com

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