Better MLR compliance reduces consumer rebates

Insurers issued about $513 million in rebates for 2012 under the medical-loss ratio requirement, according to a Commonwealth Fund report released Tuesday. That's half of the amount paid in 2011, showing greater compliance by insurers with the Affordable Care Act's MLR rule.

The report finds individual market insurers paid $200 million in rebates in 2012, less than 1 percent of their premiums. Small-group insurers refunded about $201 million to consumers in 2012--down from $289 million in 2011. Large-group insurers paid $111 million in rebates, a drop from $388 million refunded the year before.

The drop in rebates between the first two years of MLR implementation reflects a reduction in the percentage of insurers who owe rebates as well as the size of the rebates owed, finds the report.

During the first year of the MLR rule, administration costs decreased by about $200 million in both the small-group and individual markets, according to the data. Similar reduction-trends carried over into year two, when overhead costs decreased by $1.4 billion.

"The medical loss ratio requirement of the Affordable Care Act creates a higher-value insurance product for consumers," Commonwealth Fund President David Blumenthal, M.D., said today in a statement. "It also encourages insurers to improve the care their customers receive, by investing in initiatives that will help achieve better outcomes for patients."

While these reductions bode well for consumers, critics who oppose the mandate argue that it forces small- and medium-sized insurers out of business, according to The Hill.

For more:
- here's the Commonwealth Fund announcement and study (.pdf)
- check out The Hill piece