Medical loss ratio provision could have saved Illinois residents millions according to Commonwealth Fund report

Health care reform medical loss ratio study

Insurance RefundsThe Commonwealth Fund, an independent foundation based in New York that researchers health care policies, has released a new report concerning the medical loss ratio (MLR) provision of the Affordable Care Act. The MLR provision requires insurance companies to spend no less than 80% of the money they collect from premiums on improving medical care. If insurers cannot meet this standard, the money must be returned to policyholders. The provision took effect in 2011, but has been mired in litigation and bureaucracy, which has diminished its impact. The foundation’s report details what effects the provision would have had if it had been enacted in 2010.

The report suggests that insurance companies were able to make drastic changes to their policies in order to accommodate the law before it took effect. In many cases, these changes helped insurers sidestep the provision and rely on legislators to help them attain exemptions from the federal government. According to the report, if the provision had been enacted in 2010, more than 15 million Americans in Illinois alone would have saved a collective $2 billion in insurance premiums. This is largely due to the fact that insurers would not have had ample time to make changes to their policies.

The report found that the provision would have affected the individual and small group markets very differently. According to the report, 92% of consumers in the individual health insurance market would have been eligible to receive rebates from their insurance provider. Only 28% of consumers in the small group market would have been able to get these rebates, with an even smaller 12% in the large group market being eligible for rebates.

The Commonwealth Fund notes that insurers are still trying to mitigate the effects of the provision, but the burden lies heavily on small insurance companies rather than their larger counterparts. Large insurers have either already made changes to their policies or meet the standard established by the provision. Small companies, however, have difficulty meeting the standards of the provision and are susceptible to sending major rebates to consumers. This is not isolated to Illinois, of course, and is a trend throughout the U.S. insurance industry.

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