MLR Year 3: Consumers Benefit To Tune Of $5 Billion


More than $5 billion in benefits were realized by consumers from 2011 through 2013 under the medical loss ratio (MLR) provision of the Patient Protection and Affordable Care Act (ACA). In a newly issued report by The Commonwealth Fund, researchers at Virginia Commonwealth University and Wake Forest School of Law reviewed insurers’ filings with CMS, finding that the MLR provision did not substantially affect competition in health insurance markets or the choice of insurance plans available for consumers.

MLR. The MLR provision, which went into effect in 2011, requires insurers across three market segments—individual, small-group, and large-group—to spend at least 80 percent (for small-group and individual plans) or 85 percent (for large-group plans) of premiums on medical care and quality improvement. Insurers that paid less than the required percentages must rebate differences to their members.

Findings. The researchers found that in 2013, insurers paid $325 million in consumer rebates, down from the $513 million paid in 2012 and $1 billion in 2011. In 2011, median rebates ranged from $99 to $116 per member across the three market segments. By 2013, median rebates remained at $100 in the individual market, but dropped to $29 and $61 in the small- and large-group markets, respectively. The downward trend indicated that insurers were in greater compliance with MLR spending requirements.

Moreover, along with the drop in rebate amounts, insurers spent $900 million less on overhead (i.e. administrative costs and profits) in 2013 compared to 2011. Insurers had a cumulative saving in overhead costs over $3 billion during the first three years.

Although the number of insurers decreased from 2011 to 2013, roughly 500 insurers in individual, small-group, and large-group markets with 1,000 or more members were available. The researchers noted that the market consolidation was expected, but not necessarily related to the enactment of the ACA.

The report concluded that although it was not known how much of the reduced overhead was attributable to the MLR regulation, rather than market competition, it was fair to conclude that total consumers realized a benefit of more than $5 billion in the first three years of rebates.

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