Medical loss ratio provision is turning out to be a major boon for consumers
One of the provisions of the Affordable Care Act is having a major financial impact on the country by providing better benefits to consumers. The Commonwealth Fund has released a new report that highlights the affect that this provision of the health care reform law is having. The report shows that consumers have received some $3.25 billion in benefits over the past two years. This due to the provision known as the medical loss ratio.
Provision requires insurers to spend 80% of the premiums they collect on improving services
The medical loss ratio provision requires insurance companies to spend no less than 80% of the money they collect from premiums on improving the services they provide to their customers. If insurers cannot comply with this standard, they are required to return premium payments to policyholders. The 80% standard is set to increase over the coming years, meaning most of the money insurers bring in through premiums is actually going back to consumers in the form of better benefits.
Report shows that insurers have issued $1.5 billion in rebates, but are seeing higher profits as well
According to the report from the Commonwealth Fund, insurers paid out some $1.5 billion in rebates from 2011 to 2012. While this may sound like insurance companies are losing money, the report also shows that insurers were able to reduce their overhead costs by $1.75 billion during the same period. Many of these insurance companies reported increased profits as well, which suggests that the medical loss ratio provision may not be as consumer-centric as it appears to be.
Insurers are adapting well to health care reform
Insurers had expressed concerns regarding the provision before the Affordable Care Act became law, but these concerns seem to have been laid to rest, for the most part. Some insurers were worried about how they would manage to adapt to the health care reform law, as their inability to do so would make them the target of federal insurance regulators. Some insurers have run afoul of federal provisions, but have managed to adapt to the health care reform law with regulatory assistance.