“Medical Loss Ratio” Rule Goes Into Effect, Giving Consumers over $1 Billion in Savings

by Brendan Flinn on August 17, 2012

August 1st was the deadline for health insurers to issue rebates or premium credits to consumers if the insurer didn’t spend at least 80 percent of consumers’ 2011 premiums on medical care and quality improvement.

Nationally, over $1.1 billion in rebates are to be issued to 12.7 million households, averaging $151 per recipient.

The Affordable Care Act’s 80/20 rule (also known as the medical loss ratio rule, or MLR), effective for the first time this year, prevents insurance companies from using more than 20% of consumers’ premium dollars for administrative costs and profit. Large group insurers are limited to 15%. Any revenue exceeding these figures must be returned to consumers in the form of rebates or credits to future premiums.

Under the law, all insurers must inform their consumers whether or not they met the requirements of the “80/20” rule and indicate how many dollars from premiums went towards care.

All information and reports regarding MLR standards are publicly available on HealthCare.gov. Any consumer can log on and look at MLR data from their and other insurance companies. On the same page, consumers can see which insurance companies are increasing rates by an average of 10% or more. The health reform law also gave states the authority to regulate too-high insurance rate increases.

Brendan Flinn is a senior political science major at the State University of New York at Albany and a public policy intern at the National Council for Community Behavioral Healthcare.

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