$1.5 billion in insurer rebates, cost cuts

Dec. 12, 2012 at 1:56 PM
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NEW YORK, Dec. 12 (UPI) -- U.S. consumers got $1.5 billion in insurer rebates and overhead cost savings last year due to the Affordable Care Act, a non-profit says.

A Commonwealth Fund report said healthcare reform requires health insurers to spend at least 80 percent of premium dollars on healthcare or quality improvement activities or pay a rebate to their customers.

Some consumers with individual policies saw substantially reduced premiums, but not all of these savings were passed on to employers and consumers; many insurers increased profits in these markets, the report said.

"The medical loss ratio requirements are intended to give insurers an incentive to be more efficient and use most of their premium dollars for patient care," Sara Collins, Commonwealth Fund vice president for Affordable Health Insurance, said in a statement.

Michael McCue of Virginia Commonwealth University and Mark Hall of Wake Forest University found 39 states dropped administrative costs in the individual market, 37 states saw medical loss ratios improve and 34 states saw reductions in operating profits.

However, the report also found in small- and large-group markets, medical loss ratios were largely unchanged, and while spending on administrative costs dropped or profits increased.

The authors noted insurers in the individual market had a less stringent medical loss ratio requirement at 80 percent, as opposed to 85 percent in the large-group market and as a result, these insurers lowered both administrative costs and profit margins, reducing growth in premiums.

Conversely, insurers in the small- and large-group markets generally already have the required 85 percent, so while they reduced administrative costs, they had the option of turning those cost savings into profits instead of passing them along to consumers, the study said.

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