Medical-Loss Ratio Prompted Insurers to Refund $332 Million Last Year

A federal rule requiring health insurers to spend a minimum percentage of premium dollars on medical care led to more than $332 million in rebates last year, according to HHS.

A federal rule requiring health insurers to spend a minimum percentage of premium dollars on medical care led to more than $332 million in rebates last year, according to HHS. The figure is much lower than in the previous two years, which the Obama administration said reflects that insurers charged lower rates so they would clear the threshold.

According to an HHS report released Thursday, the rule saved consumers a total of $4.1 billion in 2013. The rebates issued under the medical-loss ratio—a provision of the Patient and Protection and Affordable Care Act—totaled $504 million in 2012 and $1.1 billion in 2011.

Intended to stem large spending on administrative costs and dividends for shareholders, the medical-loss ratio stipulates that health plans in individual and small group markets must spend at least 80% of premium dollars on healthcare and efforts that improve care quality. That figure is 85% for insurers in the large group market. Companies that don’t meet the standard must refund the difference to their members.

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Source; Modern Healthcare