MLR rule cost payers $1.45B, weakened individual market

The reform law's medical-loss ratio provision has forced insurers to rebate consumers about $1.1 billion and cut $350 million in administrative expenses, leading to total premium savings of $1.45 billion, according to a report from the Commonwealth Fund released Wednesday.

The report showed how the MLR rule is "improving value" for consumers, Sara Collins, Commonwealth Fund vice president for affordable health insurance, said in a statement. "However, it will be crucial to monitor insurers' responses to this regulation over time to ensure that all purchasers and consumers benefit from the savings the law is designed to encourage," she added.

The report also showed that the large and small group markets fared better under the MLR rule than the individual market. Plans in the large group market actually boosted their earnings by $33 per consumer covered last year, reported the Los Angeles Times.

However, premiums for individual plans only grew an average of 6 percent after the MLR rule was implemented, causing insurers that primarily sell individual plans to operate at a loss. The average insurer saw a drop of $31 per consumer, totaling $351 million in market-wide losses, The Washington Post's Wonkblog reported.

But the report authors aren't writing off the individual market just yet, particularly since many insurers offering individual policies also sell products in the large and small group markets. "You might see some cross-subsidizing for those individual market losses," Michael McCue, lead author and professor of health administration at the University of Virginia, told the Wonkblog.

To learn more:
- here's the Commonwealth Fund statement and report (.pdf)
- read the Los Angeles Times article
- check out the Washington Post's Wonkblog article