More insurers set premiums that didn’t require MLR refunds in 2014

In 2014, the percent of consumers insured by a company that met or exceeded the Patient Protection and Affordable Care Act (ACA) Medical Loss Ratio (MLR) standards continued to rise. Although consumers received $470 million in 2014 to compensate for overcharges on their premiums, that number represents less than half of the level of MLR refunds paid by insurance companies in 2011.

MLR. The MLR, or 80/20 standard, created by ACA Sec. 1001, serves as a protection for consumers. The rule requires that health insurance companies in the individual and small group markets spend at least 80 percent of the premium they collect from consumers (after certain taxes) on actual health care or on activities that improve health care. The rule requires that insurers in the large group market to spend at least 85 percent of health insurance premiums in the same manner.

Refunds. Under the MLR standard, when insurance companies fail to meet these requirements, insurers are obligated to pay refunds, or rebates, to their enrollees. A determination that an insurer failed to meet the MLR is based upon spending for total premiums in one state, not spending for individual enrollees. The goal of the rule is to insure that premiums remain meaningfully proportionate to health care costs while insurance companies learn to set new premiums in the changing marketplace.

Progress. Since the MLR was enacted, more than $2.4 billion in total refunds have been paid to consumers. For 2014, 3.7 million families—over 5.5 million consumers—are receiving approximately $470 million in refunds. The average refund per family is $139 in the individual market, $134 in the small group market, and $102 in the large group market.

SOURCE: www.cms.gov

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