The Medical Loss Ratio rule of the ACA, enacted in 2011, establishes consumer protection in the insurance market that requires individual and small group market insurance companies to spend at least 80 percent of the premiums consumers pay on medical care or to improve health care quality. It’s called the 80/20 rule. In the large group insurance market, that ratio is 85/15.
“The 80/20 rule is bringing transparency and competition to the insurance market, ensuring that consumers are continuing to receive value for their premium dollars,” said Health and Human Services Secretary Sylvia M. Burwell in a statement. “Standards like these created under the health care law are providing Massachusetts residents with immediate savings and are helping to keep costs down over the long-term.”
Small group market insurance is for small business employers looking to insure two to 50 employees.
Large group market insurance is typically employer-sponsored insurance policies for 50 or more employees.
Individual market insurance is for individuals who shop for insurance policies on their own. These are the people who shop for insurance on the health insurance exchanges at the state or federal level.
The 80/20 rule essentially means that consumers receive more upfront value from their insurance policies and insurance companies operate more efficiently. As a result of this rule, insurance companies have lowered premiums by $3.8 billion nationwide. Companies that do not meet the ratio requirements are required to make up the difference through refunds back to their consumers every year, hence this annual refund data dump by HHS.
Here’s how Massachusetts refunds break down for 2013:
Total refunds: $15,093,428
No. of consumers benefiting from refunds: 208,751
Average refund per family: $133
There’s been a visible shift in the value consumers get from their insurance premiums, especially in the individual insurance market, since 2011, when the 80/20 ratio was enacted. The most dramatic shift according to HHS data was in individual insurance market. In 2011, approximately 62 percent of enrollees received upfront value from their insurance plans. That figure jumped up to approximately 81 percent of individual market enrollees in 2013. HHS estimates that consumers have saved $9 billion since 2011.
Consumers must receive their refunds by August 1, 2014 either by a check in the mail, reduction in future premiums, account reimbursement, or by a reimbursement through an employer that benefits employees directly.
Here’s how those refunds break down by market for Massachusetts:
Individual market refunds: $2,807,847
No. of consumers benefiting from refunds: 37,527
Average refund per family: $100
SMALL GROUP MARKET:
Small group market refunds: $8,028,364
No. of consumers benefiting from refunds: 148,899
Average refund per family: $112
LARGE GROUP MARKET:
Large group market refunds: $4,256,856
No. of consumers benefiting from refunds: 22,325
Average refund per family: $315
Here are the insurance companies who owe refunds for 2013 to consumers in Massachusetts, alongside the combined amounts they owe in all the markets.
Neighborhood Health Plan, Inc. $6,072,945
Fallon Community Health Plan $4,163,413
Tufts Associated Health Maintenance Organization, Inc. $2,922,360
CeltiCare Health Plan of MA $644,851
Aetna Health Inc. (a Pennsylvania corporation) $700,523
Aetna Life Insurance Company $513,982
The United States Life Ins. Co. in the City of New York $71,584
The MEGA Life and Health Insurance Company $724
Mid-West National Life Insurance Company of Tennessee $607
United Healthcare of New England Inc. $438Chelsea Rice is a health producer for Boston.com. She can be reached at email@example.com. Follow her on Twitter @ChelseaRice.
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