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12-09-2012 | Article

ACA-mandate rate review nets $ 2.1 billion in savings


Free report

medwireNews: Insurance oversight provisions of the Affordable Care Act (ACA) have saved US consumers an estimated $ 2.1 billion, the Department of Health and Human Services (HHS) calculates in a report.

The ACA's insurance rate review rules have saved consumers approximately $ 1 billion, and the Medical Loss Ratio or "80/20" provision has earned nearly 13 million consumers an additional $ 1.1 billion dollars in rebates on insurance premiums, according to an HHS statement. The Medical Loss Ratio rule requires insurers to spend at least 80% of customer premiums on healthcare, or refund the difference.

"Thanks to the law, our healthcare system is more transparent and more competitive, and that's saving Americans real money," HHS Secretary Kathleen Sebelius said.

Since September 1, 2011, insurance companies in all states have been required to submit for review all proposed rate increases of 10% or more. Under the reform law, HHS provides states with grants to beef up their health insurance rate review systems; 42 states have taken advantage of the funds to date.

The rate review system is designed to determine whether proposed health insurance premium increases are based on reasonable estimates of the costs of caring for the insured over the coming year.

"Reasonable estimates appropriately reflect changes in medical costs and health care utilization instead of unjustified assumptions, like projecting excessive increases in medical costs, which would needlessly only serve to increase prices for consumers" the report's unnamed authors write.

"Historically, how states review rates varied significantly as did the amount of information they made available to consumers. The Affordable Care Act ensures that double digit rate increases in all states are thoroughly reviewed and that consumers across the country have access to at least the same basic information about their rate increase."

Half of all rate reviews conducted have resulted in either no increase or a smaller-than-requested premium increase. In all, 12% of requests for rate increases were withdrawn before review "in part because some insurers were not willing to have their proposed rate increase labeled as 'unreasonable'," the authors find.

More than two-thirds of the rulings (69%) were made by the states themselves, while HHS reviewed 31% of all rate increase requests, primarily from insurance plans offered by associations rather than employers. Such plans have traditionally not been under the purview of state insurance commissions, the report notes.

By Neil Osterweil, medwireNews reporter